...US, UK and Japanese regulators are tightening rules for asset- intensive reinsurance (AIR) to better manage counterparty and recapture risk. In the US, the life reinsurance recapture risk-based capital (RBC) factor for all reinsurance located outside of reciprocal jurisdictions is likely to be raised, as well as the RBC factor for recoverability risk, to account for increased credit risk for reinsurers that have lower financial strength ratings. The UK's Prudential Regulatory Authority (PRA) proposes to align the counterparty default adjustment applied to funded reinsurance with the corresponding fundamental credit spread. It estimates that the capital held for the average existing funded reinsurance transaction would rise to about 10% from 2%-4%. Japan has tightened supervisory expectations on managing AIR....
