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BOE MAY TIGHTEN UP ON LIFE INSURERS' USE OF OFFSHORE REINSURANCE



The Bank of England may tighten supervision of life insurers' use of the "funded reinsurance" market, typically alternative asset managers who make riskier investments, as corporate pension providers increasingly rely on this offshore sector. Funded reinsurers help insurers manage the corporate pension assets they take on through so-called bulk annuity transactions. "We consider systematic use of funded reinsurance has the potential to introduce significant risks to our objectives of safety and soundness and policyholder protection," the BoE said in a letter to insurance chief executives on Thursday.

It said it will keep funded reinsurance under review and expects to "develop further policy and supervisory measures in due course". Higher interest rates in Britain have made it cheaper for corporate pension schemes to buy insurance, enabling companies to move pension risk off their balance sheets. The bulk annuity sector hit a record high of at least 50 billion pounds ($63.51 billion) in transactions last year, according to James Mullins, partner at consultants Hymans Robertson.

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