Longevity risk transfer news

Pent-up demand for longevity risk transfer among pension schemes could make 2018 a record year for longevity swaps and reinsurance transactions, now that pricing has caught up with the latest data on mortality trends, according to Aon.

According to a report, the Abu Dhabi Investment Authority (ADIA), a sovereign wealth investment fund owned by the Emirate of Abu Dhabi and tasked with investing funds on behalf of the Government of the Emirate, is looking to buy a significant stake in pension risk transfer specialists Pension Insurance Corporation (PIC).

Prudential Financial and Pension Insurance Corporation (PIC) have joined forces to broaden pension de-risking for smaller pension schemes, by expediting the availability of longevity reinsurance through a flow arrangement, that sees Prudential providing guaranteed capacity to back PIC’s pension risk transfer deals.

The United Kingdom market for bulk annuity transactions, which see pensions or life operators transferring and reinsuring large portfolios of annuity liabilities, took off today with a record £12 billion reinsurance deal and continued activity in this market could eventually stimulate more longevity hedging.

The latest mortality data for the UK from the recently published new Continuous Mortality Investigation (CMI) model showing that lower levels of mortality improvement continue in England and Wales suggests that downward pressure on longevity reinsurance pricing will continue, reducing longevity swap premiums, according to Aon.

Hymans Robertson, a consultancy that facilitates pension risk transfer solutions including longevity swap and reinsurance transactions, has named Michael Abramson as a Partner and Risk Transfer Specialist, joining the company from Prudential.

Prudential Insurance Company of America (PICA), part of the Prudential Financial, Inc. group, has completed a $1.8 billion longevity reinsurance arrangement for Scottish Widows Limited, a subsidiary of Lloyds Banking Group plc.

Bermuda-based reinsurer PartnerRe has underwritten a £725 million longevity reinsurance arrangement for UK specialist defined benefit pension fund insurer Pension Insurance Corporation plc (PIC), the first deal between the two companies.

The outlook for longevity swap market activity in 2018 is positive, according to consultancy and pension risk specialist Mercer, but there can be no guarantees on the availability of reinsurance capacity to support transactions, with competition expected to be high.

Independent pensions consultancy Hymans Robertson has hired Baljit Khatra, an actuary with significant experience in longevity swap and reinsurance arrangements, from Mercer, as the firm looks to expand its capabilities to help pensions with their longevity risk transfer needs.