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Home > Prudential Regulation Authority > Equity release mortgages - DP1/16

Equity release mortgages - DP1/16

31 March 2016

In this discussion paper (DP), the Prudential Regulation Authority (PRA) asks for views on equity release mortgage (ERM) valuation, capital treatment, risk management and associated matters. The PRA seeks a range of views on good practice for managing the risks introduced by investing in this asset class.

The PRA previously indicated its intention to begin a review of ERMs in its 6 November 2015 Solvency II Directors’ update (See related link).

This DP is most relevant to life insurance and reinsurance companies with ERM exposure. For brevity, the term ‘insurers’ includes reinsurers in the remainder of this document. It will also be of interest to other industry stakeholders (including, without limitation, banks, building societies, other lenders, trade bodies, brokers, credit rating agencies, consultants, actuaries and auditors) and academics. By opening the discussion to a range of stakeholders, the PRA is aiming to consolidate views from across sectors.

Chapters 2 to 6 are relevant to all stakeholders. However, the discussion in Chapter 7 of restructuring ERMs in connection with the Solvency II matching adjustment (MA) is aimed at insurers and related stakeholders, rather than banks and building societies.

Discussion questions are listed in the main body of this paper and included as a list in an appendix. The PRA is seeking respondents’ own opinions rather than their understanding of market practice. Following receipt of responses, the PRA may invite some respondents to participate in further discussions (either in writing or in person) with the aim of clarifying their responses. The PRA will consult further where it considers that policy or supervisory proposals are warranted.


This discussion process closed on Friday 27 May 2016 

Please address any comments or enquiries to

Discussion paper

Equity release mortgages – DP1/16