Longevity risk transfer news

Insurance or reinsurance sidecar vehicles will be put to work to enable investors to co-invest alongside insurers and reinsurers in the pension and longevity risk transfer market, predicts Prudential’s Amy Kessler.

Phoenix Life Holdings Limited, a subsidiary of life insurance and reinsurance consolidator Phoenix Group Holdings Limited, has agreed to acquire the Abbey Life business from Deutsche Bank, a deal that will provide the troubled bank with £935m ($1.215 billion) in cash.

Growth in longevity reinsurance and longevity risk transfer business could help life reinsurers to elevate their returns on equity (ROE) above 10%, but at the same time there is an expectation that growing demand for longevity capacity will change reinsurers risk profiles, according to S&P.

Insurance group Zurich has completed two longevity swap transactions with pension funds of the Pirelli group, between them covering £600m of pension longevity liabilities and with 75% of the risk transferred to reinsurance firm Pacific Life Re.

UK life and longevity insurance and reinsurance firm Legal & General says it is actively quoting on more than £16 billion (over US$20.7 billion) of new longevity swaps in the UK alone, and says that it wants to take its pension risk transfer strategy, including longevity risk transfer, to the United States.

Abbey Life Assurance Company Limited (a subsidiary of Deutsche Bank) has completed a £1 billion longevity swap transaction benefiting the Manweb Group of the Electricity Supply Pension Scheme, part of Scottish Power UK PLC’s pension arrangements for subsidiaries.

Prudential has once again increased the longevity reinsurance protection it is providing to UK re/insurer and pension risk transfer specialist Legal & General, with a fourth longevity reinsurance agreement between the pair announced today.

Specialist longevity risk information provider Club Vita and insurance and reinsurance player Legal & General have teamed up to bring longevity risk transfer to a wider audience of pension schemes, with the goal of providing an automated longevity insurance pricing service.

Chief Financial Officers (CFOs) and pension trustees have divergent attitudes when it comes to de-risking company pension schemes, with CFOs more willing to reduce longevity risks than trustees understand, according to research from Hymans Robertson.

In the context of the risk of yields on UK gilts staying low for longer, or getting even lower, increasing following the countries recent Brexit vote to leave the European Union, Hymans Robertson believes pensions may be facing up to 50% more in longevity related liability costs.