Longevity risk transfer news

UK headquartered life and annuities insurance and reinsurance company Legal & General has hired Pretty Sagoo from Deutsche Bank to the role of Head of the Strategic Business in its pension risk transfer team.

As new mortality data feeds through into longevity insurance and reinsurance market pricing, Aon Hewitt says it sees promising signs that once pricing is absorbed and ready for clients to use it could result in a “significant year” for longevity risk transfer in 2017.

In response to the new Continuous Mortality Investigation (CMI) model, recent reductions seen in national mortality improvements can no longer be regarded as a “blip” and have put the pension longevity swap and reinsurance market into a state of flux, according to Aon Hewitt.

Last year was a testing one for the market in longevity swaps, as both pensions and reinsurance markets reacted to changes in mortality expectations driven by new data, creating market uncertainty, Aon Hewitt said.

UK closed life and pension fund consolidator Phoenix Group has unwound its 2014 £900 million longevity swap transaction with the help of Aon Hewitt, shifting to an annuity arrangement which it received beneficial pricing on thanks to having the swap arranged in advance.

UK headquartered insurance group Legal & General is looking to expand its activity in longevity risk transfer, through insurance, reinsurance and longevity swaps, to the United States as it sees an opportunity to grow the business there.

Prudential Financial and Rothesay Life have announced their sixth major longevity reinsurance transaction since 2011, with a $1.2 billion deal covering liabilities associated with 22,500 pensioners, across eight pension plans.

Some defined benefit (DB) pension plans in Canada are overestimating their longevity exposure, as longevity is seen to be lower than anticipated for Canadian pensioners, according to new data from Club Vita’s Canada division.

Longevity reinsurance capacity may have been overpriced last year, despite a reduction in liabilities flowing through from new mortality data which showed that mortality improvements were slowing, according to Aon Hewitt.

For pension schemes around the world looking to offload their longevity risks, the good news is that the longevity swap structure continues to evolve and options for longevity hedging continue to open up to a wider range of pensions.