Bank of England to Intensify Scrutiny on Risk Transfers in Insurance Sector
The Bank of England is ramping up oversight on bulk purchase annuities in the insurance industry, amid a surge in pension scheme takeovers.
The Bank of England (BoE) has announced plans to increase its scrutiny of risks associated with bulk purchase annuities in the insurance sector. This move comes as insurers are increasingly taking over company defined benefit pension schemes, with the bulk purchase annuity business expected to reach around 600 billion pounds ($767 billion) over the next decade.
According to the BoE's executive director for insurance, the rise in bulk purchase annuities has altered the dynamics of the insurance market, presenting unique risk management challenges that require close monitoring. The bank will be closely monitoring UK insurers' use of these transactions on both an individual firm level and across the sector, in collaboration with other regulators internationally.
In a significant development, Britain's top insurers are set to undergo their next stress test in 2025, with the BoE planning to publish company-specific results for life insurers for the first time. This marks a departure from the central bank's previous practice of releasing aggregate results.
The BoE's decision to ramp up scrutiny of bulk purchase annuities reflects the evolving landscape of the insurance sector and the need for enhanced risk management practices. By working closely with regulators and conducting individual firm assessments, the bank aims to ensure the stability and resilience of the UK insurance industry.
Bank of England to Intensify Scrutiny on Risk Transfers in Insurance Sector
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