Prudential reinsures $2.9B of longevity risk for Legal & General

One of the subsidiaries of Prudential Financial Inc. has entered into a new longevity reinsurance arrangement with UK-based insurer Legal & General Group, covering $2.9 billion of its pension liabilities against the risk of longevity improvements.

This is the second longevity reinsurance transaction between Prudential and Legal & General, as L&G adds protection for a portion of its pension bulk annuity business. Prudential has become one of the largest providers of longevity reinsurance protection, often assuming all of the risk from a transaction on its own, rather than as one of a panel of reinsurers.

L&G is a provider of annuity transfers to pension funds, which means that it has been assuming a growing amount of longevity risk. Some of this risk can be retained, but increasingly it will need to look to solutions to transfer this risk to other parties, using longevity swaps or reinsurance.

This latest transaction sees Prudential Retirement Insurance and Annuity Company providing longevity reinsurance on approximately $2.9 billion of Legal & General’s liabilities for retirees covered by its pension bulk annuity portfolio.

The longevity reinsurance protection provides two benefits to L&G, helping it to optimise its capital, while also offloading some of the longevity risk associated with its underwriting of annuities portfolios.

“We’re pleased that Legal & General has offered us an opportunity to partner with them again to help solve pension challenges,” commented Bill McCloskey, vice president of longevity reinsurance at Prudential.

“The impact of longevity on pension plans is a global issue that affects employees and employers across the U.S. and the U.K.,” added McCloskey. “This latest transaction demonstrates the capacity we have as a reinsurer to support the pace of the market in the U.K., which remains very active.”

We’ve added this transaction to our list of longevity swaps, risk transfer and reinsurance transactions.