Prudential Retirement has completed approximately $2.6 billion in previously undisclosed longevity reinsurance contracts, assuming the longevity risks of roughly 16,000 pensioners.
A division of Prudential Financial, Inc., Prudential Retirement provides retirement plan solutions for public, private, and non-profit organisations.
The closing of roughly $2.6 billion in longevity reinsurance agreements highlights the unprecedented start to the U.K. pension risk transfer market in 2019.
According to Prudential, this early wave of de-risking activity is partly a result of the extension to the Brexit deadline to October. Many pension plans were eager to close agreements prior to the original March 29th Brexit date, but the extension has provided pensions that failed to transact with a window to complete their de-risking plans.
At the same time, demand for de-risking solutions has been on the rise as a result of the high funded status of U.K. pension schemes, which, for the average U.K. scheme reached 100.1% on March 29th, 2019, which places many schemes in a good position to de-risk, explains Prudential.
Head of Longevity Reinsurance at Prudential Financial, Amy Kessler, said: “Pension schemes that can afford to de-risk have raced forward in the opening months of 2019, taking advantage of the window before Brexit to reduce their risks and lock in gains.
“Brexit brings increasing levels of uncertainty that could wash away recent market gains and funding improvements, putting de-risking out of reach for those with lower hedge ratios. But with funding at the highest levels in a decade, pensions are de-risking at an unprecedented pace.”
Christian Ercole, Vice President (VP) at Prudential Financial, added: “Another impetus to de-risk is the notable decline in U.K. mortality rates during the last 10 months. The resulting level of market activity favors insurers and reinsurers who have invested in their pricing and analytics teams, and it also favors pension funds that come prepared with credible and complete data.”
The longevity risk transfer market reached new heights in 2018, and a continuation of favourable market conditions is expected to result in another record-breaking year in 2019.
