The global reinsurance market is becoming increasingly attracted to longevity risks, resulting in greater competition for every longevity reinsurance transaction and causing some of the largest reinsurers to adopt a conservative approach to the segment.
For the last few years consultants have been citing the growing availability of longevity reinsurance capacity, with an increasing panel of global players willing to put down large lines to assume longevity risks from pension funds.
In fact this growing capacity available from global reinsurers to support longevity risk transfer has been cited as driving the pricing in the market, something that reinsurers are of course all too used to seeing in catastrophe risks now.
The burgeoning market in longevity swaps and risk transfer has driven a significant amount of risk into the reinsurance market, being seen as an increasingly attractive part of the market to play in which is now leading some of the largest global reinsurers to adopt a more cautious approach to growing their longevity business.
Hannover Re has long been a player in the longevity reinsurance market, but during the firm’s analysts call this week CEO Ulrich Wallin explained that the reinsurer is more conservative in its approach to this market now.
Wallin said that Hannover Re has not underwritten a new longevity reinsurance deal so far this year, although he did mention “maybe one larger one” perhaps hinting at one in the works. He also said that the reinsurer has been working on a few others recently.
The longevity reinsurance “Market has become a little bit more competitive because most of the reinsurers are competing for that business now,” Wallin explained.
As a result Hannover Re is being cautious in its approach to the segment. Wallin continued; “We take a rather conservative stance, looking for the right deals and not for the volume.”
Hannover Re’s conservative approach reflects that of another of the largest reinsurers, Munich Re, which also said it was being more cautious towards longevity reinsurance deals now.
There remains some uncertainty in the forecasts for future life extension among pension fund cohorts, causing the leading reinsurers in the world to embrace this market more cautiously it seems. It’s clearly an opportunity for the leading reinsurers to target business which is not under the same pressures as property catastrophe risks, but while growth is expected they intend to take a steady approach to reinsuring longevity risks.
Munich Re explained; “We also see growth potential in the coverage of longevity risk, although we are adopting a very prudent and selective approach here, given the difficulties involved in robust trend estimates.”
While these reinsurers are being cautious in their approach to underwriting longevity risks, others such as Prudential have been embracing the sector wholeheartedly and putting significant capacity behind longevity deals.
For Hannover Re and Munich Re, at least, it seems likely that it will be a steady approach to growing this side of their life reinsurance books.
– Reinsurers driving longevity risk transfer market pricing & capacity.
– £100Bn of reinsurance capacity available for longevity risk: Aon Hewitt.
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