Royal London in £1 billion longevity reinsurance deal with RGA Re

Royal London, the largest mutual life insurance and pensions provider in the UK, has announced the completion of a longevity reinsurance transaction which saw it transfer approximately £1 billion of longevity risk to RGA International Reinsurance Company Ltd.

The deal covers longevity risk assumed by Royal London from pensions business written by RL (CIS) Ltd., a unit the insurer purchased from Co-operative Banking Group in July 2013.

The transaction transfers the risk that pensioners with annuities in payment live longer than expected and covers approximately 70,000 pensioners which equates to approximately £1 billion of liabilities.

“We are very pleased to support Royal London through this transaction. The transaction takes advantage of the significant longevity and investment expertise we have developed in the U.K. and Continental Europe, and provides scale for further expansion of these capabilities,” commented John Laughlin, Executive Vice President, Global Financial Solutions, Reinsurance Group of America

Royal London expects the transaction will give it more certainty over the payments made under these pensions and also expects an improvement to its balance sheet.

“Longevity risks for managers of pension funds and annuities are growing as life spans continue to increase worldwide,” Laughlin continued. “RGA’s solutions play an important role in ensuring certainty for our clients.”

Simon Wainwright, Managing Director, RGA International Reinsurance Company Limited, in the UK, said; “This transaction provides the opportunity to leverage RGA U.K.’s longevity expertise into new areas. In addition, it strengthens and solidifies our position in Europe as we move to Solvency II.”

The longevity reinsurance market continues to see large transactions as reinsurers show their appetite to assume and hold these long-duration risks has not diminished.