London, April 30, 2026, 16:04 BST
- Legal & General traded higher in London after a weak Wednesday, while investors assessed a Bank of England plan to toughen rules on funded reinsurance, an offshore risk-transfer tool used by UK life insurers.
- The PRA wants capital held against the average funded reinsurance deal to move to around 10% of annuity liabilities, from 2% to 4% now.
- The issue cuts into a key growth market for Legal & General, Aviva and Standard Life: bulk purchase annuities, where insurers take on company pension liabilities.
Legal & General Group Plc shares rose in London on Thursday, but the bigger test for the insurer is now regulatory: the Bank of England’s Prudential Regulation Authority has proposed tougher capital rules for funded reinsurance, a structure used by life insurers to pass risk to reinsurers, often offshore.
The timing matters. Legal & General has made retirement income and pension risk transfer central to its growth plan, and the PRA’s move could affect how UK insurers price and fund large pension buyout deals. In a buyout, an insurer takes over responsibility for paying members of a defined-benefit pension scheme, usually for decades.
Legal & General said in March it wrote £11.8 billion of global pension risk transfer business in 2025, including £10.4 billion in the UK. The company also reported core operating profit of £1.62 billion, up 6%, and announced a £1.2 billion share buyback, part of a plan to return more than £5 billion to shareholders over 2025-2027.
The PRA said the average funded reinsurance transaction currently requires capital worth 2% to 4% of underlying annuity liabilities, compared with 11% to 15% for similar investments held directly. Under the proposal, that capital charge would shift to around 10%.
Legal & General shares were up 1.2% at 250.85 pence at 14:47 in London, after closing at 247.85 pence on Wednesday. The stock remained below its 52-week high of 279.50 pence.
Sam Woods, the PRA’s chief executive and deputy governor for prudential regulation, said funded reinsurance is “growing rapidly” and can hurt insurer resilience if not handled properly. The PRA estimates UK firms’ current exposure to funded reinsurance at about £40 billion. Bank of England
Reuters reported that large UK life insurers include Aviva, Legal & General and Standard Life, while private-capital groups including Apollo, KKR, CVC and Carlyle have expanded in the reinsurance sector. That gives the proposal a competitive edge: it is not just about capital buffers, but about who can write pension deals cheapest.
The PRA said the proposals would not apply to business already executed or completing shortly, but would apply to business from Oct. 1. The consultation closes on July 31, and the consultation paper sets out a proposed implementation date of July 1, 2027.
Skadden lawyers Robert A. Chaplin, Feargal Ryan and colleagues wrote on Thursday that the changes could “double or even triple” the capital insurers must hold for the average funded reinsurance transaction. They said that could create barriers to entry and push further consolidation among reinsurers and UK life insurers. Skadden
Huw Evans, UK head of insurance at KPMG, told Reuters the PRA had “gone further than its global peers” and said insurers may question the move’s fit with Britain’s wider growth agenda. Reuters
Legal & General’s capital-return story is still live. Its own buyback tracker showed 54.9 million shares bought by April 24 for £138.8 million, with the latest reported week covering 19.4 million shares purchased at an average £2.5717 each.
Separately, Trowers & Hamlins said on Wednesday it advised Legal & General Affordable Homes on a new £25 million revolving credit facility with HSBC, with an option to raise total commitments to £100 million. The firm said the money would support social projects and general corporate purposes; Trowers partner Natalie Singh said the structure gives the business “the flexibility it needs.” Trowers Hamlins
The risk is that the final rule changes less, later, or with more carve-outs than the market now assumes. But if the PRA sticks close to its proposal, funded reinsurance may become less attractive for larger pension deals, leaving Legal & General and peers to absorb more capital cost, pass some of it to pension schemes, or lean harder on direct investment. The PRA said around 85% of recent bulk purchase annuity business was not backed by funded reinsurance, so it expects a modest immediate market impact.
