Hannover Re reinsures longevity risk from PIC/Total pension buy-in

by Artemis on June 10, 2014

Hannover Re was the reinsurance firm sitting behind the £1.6 billion pension buy-in we reported yesterday, between specialist insurer of defined benefit pension funds Pension Insurance Corporation (PIC) and oil company Total’s UK pension plan.

The transaction saw PIC undertake a pension insurance buy-in with the Trustee of the Total UK Pension Plan, covering £1.6 billion of pensioner liabilities, including assuming the associated longevity risks. As we said in our article yesterday, PIC told Artemis that the longevity risk associated with the deal was immediately transferred to a leading global reinsurance company in a transaction completed in tandem with the buy-in.

A press release from Hannover Re today explains that it was the reinsurer in question. Hannover Re said that the £1.6 billion of pension liabilities were assumed in cooperation with PIC and have for the most part been transferred to Hannover Re. Hannover Re only assumes the biometric risk, not the investment risk, as with other transactions in the longevity reinsurance space.

Hannover Re said that it will generate total premium income of around EUR 1.9 billion from the deal. Gross premium of EUR 43 million is anticipated by the reinsurance firm for the 2014 financial year.

“We expect to see further attractive opportunities in longevity business because it is likely that companies will increasingly look for ways of limiting their pension liabilities” commented Chief Executive Officer Ulrich Wallin.

This longevity risk transaction is included in our list of major longevity swaps, risk transfers and reinsurance transactions.

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