Fortitude Re is among the reinsurers in talks with Taiyo Life Insurance Company, a subsidiary of Japanese insurer T&D Holdings, regarding a potential annuity reinsurance deal.
Taiyo Life wants to offload its inforce individual annuity business in order to reduce its investment risk and to enhance its future profitability and capital efficiency.
It’s therefore in discussions with multiple reinsurers over a transaction worth approximately 580 billion yen (USD 5.03 billion) in policy reserve and an estimated 710 billion yen (USD 6.16 billion) of reinsurance premiums, which it hopes to close by the end of March 2022.
The business in question would be a part of Taiyo Life’s inforce business of individual annuity (deferred or annuitized) and the reinsurance ararngement will likely take the form of coinsurance, under which a reinsurer would accept the liability with terms identical to the terms of the insurance which a cedant issues
Taiyo is also keen to transfer the economic risk of the inforce business without any changes upon the insurance contracts between the
policyholders and Taiyo.
If the reinsurance transaction goes ahead as planned, T&D expects the deal will have a 100 billion yen negative impact on its ordinary profit for the financial year ending March 31, 2022.
However, Taiyo is expected to see a 25 billion yen reduction in assumed interest cost, with the impact of this reduction to diminish as time
lapses.
