A unit of Prudential Financial, Prudential Retirement, (PRU) and Pension Insurance Corporation (PIC), have entered into their fifth longevity reinsurance transaction which will see PRU assume the longevity risk for $1.2 billion in pension liabilities.
This transaction is Prudential Retirement’s fourth major transaction of 2017; the pension liabilities assumed in the agreement cover about 4,000 pensioners across four pension schemes.
“Prudential is proud to strengthen its growing partnership with Pension Insurance Corporation,” said William McCloskey, Prudential’s head of transactions for international longevity reinsurance.
“Our teams have worked closely and collaboratively on five transactions worth nearly $5 billion. These agreements help PIC to manage longevity risk and thereby secure the retirement benefits of thousands of U.K. pensioners,” he said.
The two companies concluded their first agreement in 2015.
Khurram Khan of Pension Insurance Corporation said, “Prudential is now an established longevity reinsurance market participant. This latest agreement covers four sizeable transactions executed by PIC during 2017.
“The collaborative nature of the talks and speed of deal completion highlight the things we value in a partnership. Over 2017 to date, PIC has now reinsured around £3 billion of longevity risk in support of an excellent year for new business.”
PRU boasts over than $45 billion in international reinsurance transactions since 2011, including the largest longevity risk transfer transaction on record, a $27.7 billion transaction involving the BT Pension Scheme.
“The resurgent market for pension de-risking in 2017—especially in the U.K.—has sparked demand for longevity reinsurance solutions” added McCloskey; “as part of our partnership, PIC is tapping into Prudential’s capability and capacity to craft solutions that have strengthened Prudential’s leading position in the U.K.’s longevity risk transfer market.”
The transaction highlights the rebounding demand for pension de-risking solutions in the U.K., and the desire of many U.K. pension insurers to manage their risks and capital using longevity reinsurance.
According to a Hymans Robertson report, demand for bulk annuity buy-ins is expected to quadruple over the next 15 years as £700 billion worth of defined benefit pension scheme liabilities are expected to be passed to insurers by 2032.
Around one-third of current defined benefit (DB) pension risk schemes are expected to reach self-sufficiency over the next 15 years as UK firms increasingly look to offload this risk.
