Prudential and PIC reach sixth longevity reinsurance agreement amid surging demand for pension de-risking
This agreement signals strong demand for longevity reinsurance in the U.K., especially as a result of the growing desire among companies to de-risk their pensions. This desire has become more achievable due to the improved funding levels of U.K. schemes, many of which have spent several years progressively de-risking their liabilities.
Prudential Retirement, a unit of Prudential Financial, Inc. (NYSE: PRU), and Pension Insurance Corporation plc (PIC), have struck their sixth longevity reinsurance transaction since 2015. The Prudential Insurance Company of America (PICA) assumes the longevity risk for £900 million (about $1.2 billion) in pension liabilities, representing approximately 7,500 pensioners across two pension schemes.
This agreement signals strong demand for longevity reinsurance in the U.K., especially as a result of the growing desire among companies to de-risk their pensions. This desire has become more achievable due to the improved funding levels of U.K. schemes, many of which have spent several years progressively de-risking their liabilities. They are now well placed to do a buyout or buy-in. PIC and Prudential have long been leaders and innovators in providing de-risking solutions.
“We at Prudential are proud to strengthen our growing partnership with Pension Insurance Corporation,” said Tom Cahill, a director on Prudential’s longevity reinsurance team. “Our two teams have not only worked closely on several transactions, but we have also collaborated on innovative new processes that have helped smaller schemes access the pension de-risking marketplace.” The two firms concluded their last longevity reinsurance agreement in November 2017. Overall, they have come to agreements collectively worth more than $6 billion (about £4.4 billion).
Jay Shah, chief origination officer at Pension Insurance Corporation, said: “This agreement represents the sixth major reinsurance transaction between the PIC and PICA teams during the past three years. It is testament to the collaborative partnership that has been built. We believe the reinsurance market will continue to be competitive in support of the significant de-risking activity expected over 2018.”
Amy Kessler, head of longevity risk transfer at Prudential, added: “Over the last several years, Prudential’s longevity reinsurance innovations have proven time and again to help companies achieve certainty in their liabilities. Insurers like PIC come to us for our reinsurance expertise, our deep capabilities, and our capacity to innovate in ways that meet the changing needs of institutions. Most importantly, we have worked closely with PIC to help them secure the pension benefits for thousands of people.”
This is Prudential’s first major longevity reinsurance transaction of 2018. Prudential is a global leader in the pension reinsurance market with more than $50 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.