It has now been two months since the PRA opened a consultation on the eligibility of unfunded guarantees as a form of credit risk mitigation for banks. The consultation will remain open for responses for two and a half more weeks – until 16 May 2018.
Although the consultation relates to banking regulation, the consultation has caused deep concerns for credit insurers. This is because credit insurers provide a large proportion of the credit risk mitigation protection on which banks rely. If brought into force, some of the proposals made by the PRA in its consultation paper would make many traditional credit insurance products ineligible as a form of credit risk mitigation for banks.
We have been working with some of our clients to consider how the PRA’s proposals might affect credit insurers and the products they offer. From our discussions it is clear that there are some points of concern for the industry as a whole. We have written a paper which examines the background to the consultation and comments on the proposals and their potential effect on credit insurers and banks. You can read the paper here.