NN Group through its subsidiary NN Life has completed two transactions to transfer the full longevity risk associated with approximately €13 billion of pension liabilities in the Netherlands, to Prudential Insurance Company of America (Prudential) and global reinsurer Swiss Re.
The transactions cover the longevity risk of approximately 300 thousand policies, the risk transfer is effective from 31st December 2023. The deals will reduce NN’s exposure to longevity risk and thereby further strengthen NN’s capital position.
The reinsurance agreements will continue until the portfolio has run off. The reinsurance deals do not impact the services and guarantees that NN provides its policyholders.
Prudential Financial, Inc. through its subsidiary, The Prudential Insurance Company of America (Prudential), will assume $9.2 billion, roughly €8.4 billion, through a longevity risk transfer agreement that reinsures a block of more than 200,000 policies.
This means that Swiss Re will assume around €4.5 billion of longevity risk via the remaining 100 thousand or so policies.
David Knibbe, Chief Executive Officer, NN Group, commented, “The capital uplift and economics from these transactions are very attractive compared to the limited impact on operating capital generation. It underscores our efforts to continually look for value-creating opportunities, reduce longevity risk in the Dutch market, and actively manage our balance sheet.”
Charles Lowrey, Chairman and Chief Executive Officer, Prudential Financial, Inc., added, “Prudential is proud to support NN Life through this transaction, and we are excited to expand the presence of our Institutional Retirement Strategies business into The Netherlands.
“This longevity risk transfer further demonstrates our vision to be a global leader in expanding access to investing, insurance, and retirement security.”
Alexandra Hyten, Head of Institutional Retirement Strategies, Prudential, added: “With the recently passed Dutch pension reform legislation, we anticipate the market for risk transfer to continue to grow. We are well-positioned to assist insurers and plan trustees in meeting their de-risking objectives by offering customized reinsurance solutions.”
The longevity transactions will result in an upfront capital benefit and are expected to increase the NN Group Solvency II ratio, the lower risk profile will result from the longevity transactions will lead to a limited decrease in the operating capital generation for the first five years in the range of €30-35 million per year.
The deal marks Prudential’s first international longevity reinsurance transaction in the Dutch market and directly aligns with the company’s growth strategy.
