After a very strong 2021 that saw Prudential Retirement Strategies close a good mix of pension risk transfer (PRT) deals across various structures, Rohit Mathur, Head of International Reinsurance, told Reinsurance News that the future looks bright.
Activity in the UK PRT market was very robust last year with buy-in and buy-out volumes of around the £30 billion mark. With market pricing remaining attractive, good attention from the re/insurance community persisting, and a growing desire from pension schemes to de-risk, all indications are that 2022 will be another busy year.
Against this backdrop, we spoke with Mathur, who is responsible for Prudential’s longevity and funded reinsurance businesses in the UK and Europe, about the company’s experience in 2021 and the outlook for the year ahead.
“Personally, we did several large transactions. There were a good mix of large cases and the largest one we announced was a pension swap with Zurich in March,” said Mathur. “We also completed a bunch of other smaller cases. So, all in all, a very strong year for us and we remain optimistic.”
With some industry consultant estimates for UK PRT market volume in 2022 approaching £40 billion, alongside an expectation that some larger transactions could test the market in the months ahead, and a strong pipeline on the pension swap side, Mathur explained that Prudential is well placed to take advantage of the opportunity.
“For us, it’s being there for our clients, it’s innovation, it’s solving their challenges, and every deal is different, every transaction is different. We aspire to be true solution providers and partners to our insurance clients and to the pension schemes,” said Mathur.
“And it’s also tweaking our product offering to meet the needs of the various market segments, including efficient pricing for smaller cases,” he added.
As an example, Mathur noted Prudential’s development of a flow offering that aids its pricing of smaller cases.
“It’s lower flow treaties that we sign with insurers that provide systematic pricing for smaller cases on a pre-agreed criteria. These kinds of innovations we need to continually do to be relevant to our clients. So, I think you’ll see more of that in the market; the reinsurance and insurance community continuing to innovate to meet the needs of clients,” he explained.
“We’re very well positioned to meet the needs of our clients, whether it’s in the reinsurance of swaps, or supporting insurers and their buy-ins and buy-outs,” continued Mathur.
Overall, Prudential sees continued strong momentum in the market with a growing pipeline, and Mathur posited that one driver is the recognition that market volatility is here to stay, especially in light of varying successes of vaccine rollouts and to new variants of COVID-19.
“All that leads to is greater volatility in the market, which can sometimes provide opportunities, especially for schemes that are otherwise well-hedged, to take advantage of moments in the market in the year; get good pricing and seamlessly execute.
“What’s also apparent is it’s unclear where the pandemic is heading, but I think risk is heightened. The path of future longevity improvements is uncertain and that supports de-risking. If you’re a pension scheme and you have exposure, doing a hedge, whether it’s a longevity hedge or a risk transfer transaction, is more valuable. Protection is far more valuable in uncertain times. I think that’s what we’ve seen and that’s what we continue to see in terms of the market,” said Mathur.
To conclude, Mathur reiterated that for those looking to transact, PRT market conditions remain favourable and now could be a good time to for schemes embark on their de-risking journey.
“If you’re a pension scheme looking to de-risk, this may be a good time to enter the market. It’s always a good time when volatility is enhanced and these days volatility is high and long-term consequences are unclear. And there’s benefit and value to the de-risking.
“So, I think more and more companies are joining thousands of others that have already done so,” said Mathur.