Prudential Retirement, a subsidiary of Prudential Financial, Inc., has concluded $3.2 billion in previously undisclosed longevity reinsurance contracts.
As part of these transactions, The Prudential Insurance Company of America (PICA) will assume the longevity risk for approximately 13,200 retirees.
Prudential said that the conclusion of this deal reflects the rapid expansion of pension de-risking activity in the UK, which has recently become more affordable due in part to the improved funded status of UK schemes.
“The average U.K. pension scheme is at or near full funding, a material improvement over the last two years,” explained Amy Kessler, Head of Longevity Risk Transfer at Prudential.
“That is happening at the same time longevity improvements have slowed, which has made pension de-risking more affordable than it has been in years,” she continued. “Pensions are actively taking advantage of this environment by locking in these gains and transferring risk, knowing that such periods don’t last forever.”
The UK longevity reinsurance and longevity swap market is currently set for one of the best years on record, with at least 10 other deals completed over 2018 that were at least $1 billion in size.
“The unprecedented level of market activity in 2018 favors insurers and reinsurers who have invested in their pricing teams and analytics. It also favors pension schemes that come prepared with credible and complete data,” said David Lang, Vice President at Prudential Financial.
“And while there is plenty of insurer and reinsurer capital for these transactions, the biggest factor constraining the market today is the human capital needed to bring deals through to closing,” he added.
Prudential has completed more than $50 billion in international pension reinsurance transactions since 2011, including the largest longevity risk transfer transaction on record, a $27.7 billion transaction involving the BT Pension Scheme.