In this discussion paper, the PRA asks for views on ERM valuation, capital treatment, risk management and associated matters. The PRA seeks a range of views on good practice for managing the risks introduced by investing in this asset class.
This discussion paper is most relevant to life insurance and reinsurance companies with equity release mortgage (ERM) exposure.
For brevity, the term ‘insurers’ includes reinsurers in the remainder of this document. It will also be of interest to other industry stakeholders (including, without limitation, banks, building societies, other lenders, trade bodies, brokers, credit rating agencies, consultants, actuaries and auditors) and academics.
By opening the discussion to a range of stakeholders, the Prudential Regulation Authority (PRA) is aiming to consolidate views from across sectors.
Chapters 2 to 6 are relevant to all stakeholders. However, the discussion in Chapter 7 of restructuring ERMs in connection with the Solvency II matching adjustment (MA) is aimed at insurers and related stakeholders, rather than banks and building societies.
Discussion questions are listed in the main body of this paper and included as a list in an appendix. The PRA is seeking respondents’ own opinions rather than their understanding of market practice.
This discussion process closes on Friday 27 May 2016
Discussion paper
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