Longevity risk transfer news

Divergent mortality rate improvements through socio-economic groups creates difficulties with the establishment of a market-based approach to longevity risk transfer, and could limit available reinsurance capacity for the risk, according to the 2016 OECD Business and Finance Outlook.

Prudential Insurance Company of America has provided Pension Insurance Corporation, the specialty insurer of defined benefit pensions, with longevity reinsurance covering around $1.1 billion of liabilities, int he third transaction between the two firms.

Aon Hewitt, the talent, retirement and health unit of insurance and reinsurance broker Aon, has hired experienced longevity risk expert Matthew Fletcher to its Risk Settlement Group from Hymans Robertson.

Solvency II could increase demand for reinsurance capacity to back longevity risk transfer and longevity swaps, as insurers entering into bulk annuity pension risk transfer transactions find offloading the longevity risk can be more efficient.

The Life & Longevity Markets Association (LLMA) and the Institute and Faculty of Actuaries (IFoA) have set up a research team, to be led by Macquarie University, which will seek to develop a method for assessing the basis risk of longevity risk transfer transactions.

Prudential has completed a third longevity reinsurance transaction with UK insurer Legal & General, helping the company to better manage its pension liabilities by offloading more of its longevity risk associated with bulk annuities.

Global advisory, insurance and reinsurance broking firm Willis Towers Watson (WTW) has launched a new mortality risk model, which it says is the first to use medical science and the views of medical experts to improve longevity predictions and improve pricing of re/insurance.

London-based Pension Insurance Corp. (PIC) increased the volume of longevity exposure it reinsured in 2015 to £3.8 billion, supporting the growing trend of specialist pension insurers utilising longevity reinsurance capacity to manage their exposures.

Prudential plc, the UK domiciled life insurance, health, pensions and financial services group, significantly increased its longevity reinsurance protection in 2015, buying enough protection to cover an additional £6.4 billion of annuity liabilities.

The use of longevity hedging instruments, such as swaps and reinsurance, is expected to grow in 2016, with longevity risk increasingly on the agenda for pension funds, while reinsurer appetite for assuming longevity risks remains strong, according to Willis Towers Watson.