We intend to strengthen our monitoring of funded reinsurance, for example analysing structures and the risks that they pose in detail. And we will think about whether protecting policyholders demands limits on acceptable structures or on volumes of transactions. The PRA also sees the continued and increasing levels of offshore longevity reinsurance as an important issue. Under both longevity and funded reinsurance arrangements, it is the insurers themselves who remain liable for their promises to millions of annuitants, and their ability to honour those promises depends on the effectiveness of these risk transfer strategies. Both types of reinsurance arrangements potentially expose insurers to complex and concentrated risk. And they will be supervisory priorities for us. Growth of private credit / illiquid assets The majority of credit risk, if not the insurance or longevity risk, is still retained by annuity firms. The second observed trend that carries potential concentration risk relates to investment in private credit or illiquid assets. The rapid growth of private credit has been striking, with global fund raising activities reaching $ in 2021 [see Chart 3][11]. The key reasons for this growth are widely understood: attractive returns tapping into the illiquidity premium, diversification benefits and more bespoke arrangements that match lenders’ appetites to borrowers’ needs. In addition, the long-term nature of many of these assets offers a good duration match for insurers with annuity liability portfolios. This is why UK life insurers have been an active participant of this trend, many with their own in-house origination functions[12] and engaging in direct lending activities.

They are universal banks; and as such much less vulnerable to funding market conditions. Sound and revolving sources of profits are a vital asset at the current juncture. In this context, French banks can play an active role in the ongoing restructuring of the international financial sector. All in all, beyond sometimes serious tensions and incidents, French banks are now reaping the benefits of the major advances in productivity and innovation they have made over the last two decades. Public policy during the crisis both from a public and a private sector perspective Past months have seen a marked change in public policy. Having been in a first phase geared exclusively to providing liquidity to financial intermediaries, public intervention is since last Fall also aiming to support banks’ financing and own funds. This is a significant shift. Needless to say, restoring liquidity remains a pressing priority. Inter-bank markets have shown gradual signs of improvements. Yet, there is still some way to go. To this end, central banks have mobilised considerable ammunition. A process underway for over a year has culminated in the central banks having adjusted their operational frameworks in various areas. The maturity and currency of their facilities have been expanded. The range of eligible counterparties has been broadened. The tender procedures have been modified with a view to ensure unlimited amounts of central bank money. The list of collateral for refinancing has been widened. As for the Eurosystem, they have been providing liquidity at a fixed rate for unlimited amount.