3
Notification
3.1
In order to supervise firms’ risk management practices, the PRA expects to be notified of new large and/or complex longevity risk transfer and hedge arrangements and the firm’s proposed approach to risk management well in advance of the completion of any transaction. This expectation applies where a firm is buying or selling longevity protection. The definition of what constitutes a large and/or complex transaction would be those that:
- have a value/financial impact that are larger than typically transacted on a business as usual basis.
- have a structure that is more complex than business as usual transactions (for example, where the risk transfer is structured using instruments less tested in the market such as insurance linked securities, or by the firm, such as automatic reinsurance pools); or
- have a material incremental impact on the firm’s ability to meet its Solvency Capital Requirements under Solvency II.
- 09/01/2020
3.2
For all other longevity risk transfers, we have sought to reduce the pre-notification requirements in a way that reduces the level of detail needed and the amount of time firms need to spend compiling this information.
- 09/01/2020
3.3
For these other transactions, firms should update the PRA of the transaction details by completing the template below and returning it to their supervisory contact. This template may be submitted shortly after the reinsurance has been placed.
- 09/01/2020
3.4
As well as allowing the PRA to gain a fuller picture of the market in a way that requires less time and effort on the part of firms, this template would also allow it to understand the potential build-up of risk concentrations as a result of these transactions. This will enable supervisors to consider whether the risks of the proposed transaction are being appropriately managed and that the transaction has an underpinning rationale that is consistent with good risk management principles.
| Counterparty name and location | Existing counterparty (Y/N) | Intragroup transaction (Y/N) | Risk(s) transferred | In respect of the longevity component of the risk transfer, is the transaction a longevity swap, quota share, or other? | |
| Effective date | Notional liability amount transferred (£M) | Notional liability amount covered by collateral (£M) | Collateral mechanism | Eligible collateral assets | Any additional features of note (e.g. pre-Part VII reinsurance etc.) |
- 09/01/2020
3.5
Note: the purpose of this table is to establish the size and general aspects of the longevity component of risk transfers. If there are additional features, such as complex splits with asset risk, please discuss these with your normal supervisory contact, as these may require more in-depth discussion.
- 09/01/2020