Prudential Retirement, a business unit of Prudential Financial (PFI), is expanding its global longevity reinsurance business with a new offering driven by a huge growth in the UK pension market.
PFI’s first transaction in the emerging funded reinsurance market closed in June with UK insurer, Aviva.
The UK market for pension bulk annuity contracts has experienced explosive growth in recent years. As a result, insurers are seeking reinsurance partners to take on the full asset and longevity risk in order to bring additional capital and asset management expertise to the market to fuel its continued growth.
Rohit Mathur, vice president and head of International Transactions for PFI commented: “PFI is thrilled to be able to announce this transaction with Aviva today. Aviva has been a great partner and we are delighted to complete our first funded reinsurance deal with them.”
“Funded reinsurance, PFI’s latest de-risking offering, allows an insurer to transfer both asset risk and longevity risk associated with pension and annuity liabilities.
“The reinsurer contracts to reimburse the insurer for monthly benefits for as long as people live. Up until now, PFI has reinsured longevity risk from insurers, but here we also take the asset risk, becoming an additional layer of security, mirroring the insurer’s promise to pay all benefits for as long as the people live.”
John Smitherman-Cairns, Managing Director of Annuities at Aviva further noted: “This innovative funded reinsurance transaction further strengthens the relationship between Aviva and PFI and is the result of a fantastic collaborative effort between both parties.”
Amy Kessler, head of International Reinsurance for PFI added: “Since early 2019, we have witnessed an increase in market activity and volumes in the U.K. market leading to a greater need for funded reinsurance solutions.
“Our entry into the funded reinsurance business is a natural place for us to expand. The presence of reinsurers like us, with both longevity capacity and asset management capabilities, will allow the U.K. market to continue to grow in new ways in the years to come.”
Christian Ercole, vice president, International Reinsurance, said: “We are a top 10 global asset manager with strong expertise originating and managing corporate and private fixed income assets. Our offering indirectly provides U.K. insurers access to our asset origination capabilities to support this growing market.”