Prudential Retirement, part of Prudential Financial, has reinsured longevity risk for approximately £1 billion (nearly $1.4 billion) in pension liabilities from Aviva Life and Pensions, the first such transaction between the two companies.
The deal comes amid a rising appetite for de-risking in the U.K as attractive pricing and enhanced capacity of insurers drive the affordability of pension risk transfer.
“We are delighted to establish a new relationship with Aviva,” said William McCloskey, Prudential’s Head of International Transactions for Longevity Reinsurance.
“Over the last several years, Aviva has become a premier pension insurance provider, one that has made thoughtful investments in its capabilities to support the continued expansion of the U.K pension risk transfer market. We are thrilled to collaborate and partner with Aviva on such an important agreement.”
Funding levels of U.K pension schemes have actually improved significantly since the 2016 Brexit vote, this is believed to be driven by fresh contributions, strong investment performance and higher gilt yields.
Tom Ground, Managing Director of defined benefit solutions at Aviva, commented, “We’re delighted to have entered into this transaction with PICA. As one of the leading reinsurers, it has the credentials and scale to support our own growth ambitions as we continue to increase deal volumes in the U.K. We hope this deal is just the start of a longer-term relationship.”
Head of Longevity Risk Transfer at Prudential, Amy Kessler, added, “Market activity in 2018 is building toward a very strong second half. Rising rates and equities, combined with lower-than-expected longevity improvements, mean that pension schemes are very well-funded and that de-risking is more affordable than ever.
“Leading pension schemes are taking advantage of this favourable environment by locking in gains and transferring risk, knowing that such advantageous markets are always fleeting.”
