Pension Corp. in £1.6bn longevity reinsurance deal with Prudential

Pension Insurance Corporation (PIC) has entered into a £1.6 billion longevity reinsurance transaction with the Prudential Insurance Company of America (PICA), the second transaction between the two in recent months.

As longevity risk builds up within specialist providers of pension scheme buy-ins, buy-outs and longevity insurance or swaps, it needs to be passed on to sources of longevity reinsurance capacity.

Pension Insurance Corp. has been accumulating longevity risk through its insurance deals and has now twice elected to pass on some of this risk to Prudential. Prudential remains one of the largest providers of longevity reinsurance capacity in the market, assuming significant amounts which it treats to a degree as a hedge for the mortality risk exposures it assumes in its life insurance business.

This £1.6 billion longevity reinsurance agreement covers in-payment lives across 74 pension schemes, representing some of PIC’s exposure to longevity risk acquired through its writing of pension insurance buy-ins and buyouts over the last few years.

This is the second reinsurance transaction that PIC has concluded with Prudential in 2015, the first being in April, in total covering the longevity risk for around 17,000 individuals and, where applicable, their spouses.

PIC has now concluded a number of longevity reinsurance agreements with global reinsurers over the years, with approximately £9 billion of pension liabilities longevity risks offloaded, equating to around 80% of its total longevity exposure. In the past year alone, PIC has reinsured close to £4 billion of longevity risk.

“This transaction represents another milestone for the longevity reinsurance market and we’re pleased that PIC has once again chosen to partner with PICA as a provider of longevity risk solutions,” commented William McCloskey, vice president, longevity reinsurance.  “Our partnership with PIC supports the growing pension de-risking trend in the United Kingdom and ensures there is capacity for pension schemes seeking to manage their risk.”

Khurram Khan, Head of Longevity Risk Management at PIC, added; “This is an unprecedented deal for PIC, in terms of both the nature and size of the project. Despite the added complexity, we are delighted to have concluded this transaction within a relatively short period.”

View the list of transactions in our longevity swap, reinsurance and risk transfer deal directory.