The PRA and FCA have recently reiterated the intention that sterling LIBOR will cease to exist after the end of 2021.
LIBOR transition is a process that the market and individual firms will need to follow. It involves the move away from using LIBOR as the core benchmark for sterling denominated short-term interest rates (and for derivatives referencing such rates).
The replacement benchmark selected for sterling is SONIA. Insurers that hold financial instruments such as swaps that depend explicitly on LIBOR will often be doing so for hedging purposes and need to consider the timing of their transition.
This briefing note provides a background to LIBOR transition, the issues for insurers and the broader market, together with a look at the next steps and recent pronouncements from the PRA and FCA.