{"id":1994,"date":"2026-04-29T20:14:17","date_gmt":"2026-04-29T20:14:17","guid":{"rendered":"https:\/\/0b522dce0d13732e522b73f1e69d187e-19282.sites.k-hosting.co.uk\/?p=1994"},"modified":"2026-05-05T20:08:40","modified_gmt":"2026-05-05T20:08:40","slug":"europes-need-for-air","status":"publish","type":"post","link":"https:\/\/lifere.org\/europes-need-for-air\/","title":{"rendered":"Europe\u2019s need for AIR"},"content":{"rendered":"\t\t
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The structural shifts in life insurance have in part been fuelled by circumstance \u2013 specifically the low rates following the financial crisis \u2013 but also the eternal quest to innovate.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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A Life-Re Europe afternoon panel looked at how reinsurance might be the innovation the life market is looking for \u2013 in particular how AIR might expand across Europe. David Lipovics, Senior Vice President, Managing Director, Continental Europe at RGA, has been involved in the company\u2019s development of AIR on the continent. He said that while discussions on AIR are \u201cnuanced\u201d and conducted on a country-by-country basis, \u201cwhich makes it challenging to have a pan-European reinsurance strategy,\u201d there is positivity on the future direction of this market.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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\u201cI\u2019m actually very optimistic that we\u2019ll see more transactions on the continent,\u201d Lipovics said, citing the precedent transactions RGA has been involved with in Switzerland and Belgium as models for future deals, as well as the over \u20ac8 trillion worth of non-reinsured reserves on the continent which remains untapped. Even so, getting the market off the ground will require some work.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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Giving the insurer take on AIR \u2013 or funded reinsurance, as it is called in the UK \u2013 Radhika Ravi, Head of International Solutions at L&G, said the company has used AIR \u201cjudiciously\u201d to-date.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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\u201cWe need to ensure that we can justify the use of funded re in a way that doesn\u2019t undermine the resilience of our balance sheet, and it also doesn\u2019t undermine our ability to honour the obligations and policies that we\u2019ve made for policyholders,\u201d said Ravi.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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Transactions<\/h2>\t\t\t\t<\/div>\n\t\t\t\t
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Getting a transaction off the ground requires care and attention. While reinsurance partners bring advantageous propositions to the table, counterparties will not always be perfect all rounders. And that means life insurers should be cautious when entering into a reinsurance deal. Ravi outlined certain \u201cnon-negotiables\u201d when deciding on a reinsurance counterpart.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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\u201cNumber one, we only place business with highly credible, highly rated counterparties. That\u2019s very important to us. We are very clear about the investment guidelines and the plan. Any eligible assets, we have a specific capacity for duration mismatching. We ensure that there are clear limits of asset classes.\u201d<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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Ravi also spoke about the relationship between insurer and regulator in innovations like AIR.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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\u201cUltimately, I would say it\u2019s really important for institutions to have a healthy, constructive relationship, but also some healthy tension with their regulator.\u201d<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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AIR is not the only innovation that might bring new capital into Europe. Other tools include securitisation structures, special purpose vehicles and sidecars. Bringing in \u201cnew, credible, long-term sophisticated investors is, I think, in everyone\u2019s interest,\u201d Lipovics said, while adding, \u201cThe business case for growth is there, but the access point is very hard. Europe is typically a high barrier to entry place. I think that a sidecar access route could be quite interesting but with a European twist.\u201d<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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No doubt appetite for innovation is there. And participants appear optimistic for the moment. But converting the talk into practice will be a challenge for, as the saying goes, there is many a slip between the cup and the lip.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t

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The PRA praised<\/h2>\t\t\t\t<\/div>\n\t\t\t\t
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In comparison to Europe, the UK has seen a flourishing AIR market, with funded re having become a tool of significance for the local life business. At least that was the case until last year when the UK\u2019s financial regulator, PRA, stepped in and announced, via a speech by Vicky White, Director of Prudential Policy at the PRA, that it was clamping down on the market, which in turn sparked a fire of outrage in the UK life re-insurance community.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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Participants accused the PRA of proposing a heavy-handed and unworkable approach and one which could stymie a valuable resource for insurers. Some of the initial heat seems to have died down this year. Life-Re speakers suggested the PRA has now checked itself and pulled back from some of its more trenchant views on AIR.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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\u201cIt [the PRA] has done a great job at raising the standards when it comes to different practices, increasing accountability, really improving the transparency of some of these collateral structures and discouraging bad practices,\u201d said L&G’s Ravi. \u201cThere is no denying that something like additional capital charges on use of funded re would be disappointing, but it\u2019s exactly that sort of conversation that the industry needs to engage with.\u201d<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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Ravi, indeed, praised the \u201cregulatory oversight\u201d the PRA has brought in igniting a debate on this topic.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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Building the insurer-regulator conversation is vital to allow the market to develop, added Lipovics.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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However, he warned that work needs to be done for the PRA to clarify its position. \u201cWhat\u2019s particularly paralysing is sometimes the inertia that so many potential cedent companies just don\u2019t know whether this would actually work or is going to be allowed,\u201d he said. \u201cSo coming out with some sort of guidance on the circumstances under which it could work is important.\u201d<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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No market likes uncertainty \u2013 and the same applies to AIR.<\/p>

* Note: this article was written prior to the PRA’s April announcement<\/a><\/strong> on funded re.<\/em><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

Asset intensive reinsurance (AIR) has taken hold in life markets around the world. Europe, though, is a different story. But does Europe really need AIR?<\/p>\n","protected":false},"author":1,"featured_media":1958,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[15,21],"class_list":["post-1994","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-life-re-europe-2026-review","tag-feature","tag-main4"],"_links":{"self":[{"href":"https:\/\/lifere.org\/wp-json\/wp\/v2\/posts\/1994","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lifere.org\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lifere.org\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lifere.org\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/lifere.org\/wp-json\/wp\/v2\/comments?post=1994"}],"version-history":[{"count":55,"href":"https:\/\/lifere.org\/wp-json\/wp\/v2\/posts\/1994\/revisions"}],"predecessor-version":[{"id":3353,"href":"https:\/\/lifere.org\/wp-json\/wp\/v2\/posts\/1994\/revisions\/3353"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/lifere.org\/wp-json\/wp\/v2\/media\/1958"}],"wp:attachment":[{"href":"https:\/\/lifere.org\/wp-json\/wp\/v2\/media?parent=1994"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lifere.org\/wp-json\/wp\/v2\/categories?post=1994"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lifere.org\/wp-json\/wp\/v2\/tags?post=1994"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}