moderation in all things speech by charlotte gerken given at the 20th annual conference on bulk annuities published on 27 april 2023 the bulk purchase annuity ( bpa ) market is in a period of accelerated growth, and insurers may be tempted to over - indulge in new business in the short run. charlotte gerken outlines three areas where we are already seeing this in practice : an expansion of bpa insurer risk appetites ; an increased reliance on third party capacity ; and greater interconnectivity with the wider financial system. insurers will be playing an increasingly important role in providing financial security to millions of annuity policyholders and as investors in the uk real economy. to be successful in both over the medium to long term, insurers ’ senior managers need to exercise moderation in the short term. their decisions today commit them and their successors to pay pensions for many decades to come. charlotte explains how, working with insurers, the pra aims to strengthen senior management accountability and enhance market discipline through the implementation of the solvency uk package. speech introduction thank you for your introduction, and for inviting me back to the bulk purchase annuities conference. a lot has happened since i spoke at last year ’ s event [ 1 ] – in financial markets, the economic outlook and on the regulatory side. and a lot is happening in the bulk purchase annuities ( bpa ) market : pension scheme funding levels have greatly benefited from the rise in interest rates [ 2 ], and the uk insurance industry is preparing itself for record levels of bulk purchase annuity transfers [ 3 ]. de - risking corporates of their legacy defined benefit schemes brings substantial benefits to uk plc, and the additional capital insurers inject contributes to the security of pension scheme members. this structural shift in the provision of retirement income also gives insurers an increasingly important role as long term investors in the uk real economy. insurers therefore need to balance the short term financial and reputational incentives to grow rapidly, with long term and enduring financial strength, to meet the long term needs of policyholders and the economy. i spoke to you last year about the conditions for long - term sustainable growth in the annuity sector. this year, in the face of considerable temptation to capture business opportunities, i will argue that bpa writers need to exercise moderation. in that vein, let me invite you to a not quite epicurean three course

now, it ’ s still a long way from where it was before all this began. growth of 5 % in q2 would still leave uk gdp 4 % lower than at the end of 2019. and economic contractions don ’ t normally lead to higher inflation. we can identify a number of contributory factors, things that help to account for this contrast, right off the top. one is base effects. arguably, comparing economic growth over the past eighteen months with the change in prices over the past twelve isn ’ t quite fair. one of the reasons annual inflation has risen so steeply through this spring is that prices of goods ( energy in particular ) fell significantly a year earlier, during the first phase of the pandemic. over the past year and a half as a whole, so including that initial drop, headline and core cpi have both risen at an average ( annualised ) rate of 1½ - 1¾ %, a little weaker than pre - pandemic rates. we know too that quite a bit of the drop in output has been matched, on the supply side, by the significant numbers on the furlough scheme. the cjrs has successfully protected millions of jobs. but, because those on furlough aren ’ t available for others, it ’ s had the effect of matching part of the decline in labour demand with a decline in labour supply. during the second quarter of this year it ’ s likely that an average of over 2½ million people were furloughed – more than 7 % of the workforce. some of those employees were actually working, at least on a part - time basis, and furloughed jobs tend to be less well paid than the average. but, taking account of these things, the scheme was still holding back effective supply in the economy by an estimated 2 % - 3 % in q2 ( chart 1 ). all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice finally, we also know that the share of the population either in or actively looking for work – the so - called participation rate – has also fallen ( the red line in chart 2 is the year - on - year change ). this too will have reduced the supply of labour. chart 1 : by protecting jobs cjrs had the effect of reducing labour supply alongside labour demand1, 2 sources : ons, hmrc, obr and bank calculations.