Prudential in third longevity reinsurance deal with L&G

Prudential has completed a third longevity reinsurance transaction with UK insurer Legal & General, helping the company to better manage its pension liabilities by offloading more of its longevity risk associated with bulk annuities.

Prudential provided Legal & General with longevity reinsurance in a $2.2 billion deal in October 2014 and again in a $2.9 billion transaction in August 2015. The size of this latest and third transaction between the two firms has not been announced.

L&G provides bulk annuity transfers to pension funds, so assuming a growing volume of pension liability related longevity risk. Some of this risk can be retained by the insurer, but increasingly it will need to look to solutions to transfer this risk to other parties, using longevity swaps or reinsurance.

Reinsurance has been the choice of late for L&G, as evidenced by this third transaction. Prudential has shown a strong appetite for longevity risk, as it acts as a natural hedge for its mortality insurance portfolio.

“This latest transaction builds on our relationship with Legal & General and solidifies the platform from which future business can be written,” commented Bill McCloskey, vice president, Longevity Risk Transfer at Prudential Retirement. “It’s also a testament to our experience in the reinsurance space and our capacity to support the growth of the U.K. longevity risk transfer market.”

Under the terms of the longevity reinsurance agreement Prudential Retirement Insurance and Annuity Company (PRIAC) will reinsurer a portion of Legal & General’s bulk annuity business, providing benefit security for thousands of retirees in the U.K.

“We are delighted to work with PRIAC once again, further strengthening this productive partnership,” stated Kunal Sood, head of new business reinsurance at Legal & General.

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