Swiss Re Insurance-Linked Fund Management

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Munich Re reinsures £400m of longevity risk for Pension Corp


The world’s largest reinsurer Munich Re has entered into an agreement with pension risk transfer specialist Pension Insurance Corporation which will see Munich Re take on £400m (approximately $650m) of longevity risk from the insurer. Munich Re will take on the longevity risk associated with a portfolio of pension risks that Pension Corporation has covered in its pension insurance business.

This now takes the amount of longevity risk that PIC has offloaded to reinsurers this year to £1 billion. In the last four years PIC has passed on almost £4 billion worth of longevity risk, associated with 17 different defined benefit pension schemes, to reinsurers as it seeks to manage its risk and capital allocations prudently.

CFO of PIC Rob Sewell commented; “This type of reinsurance transaction typifies our careful approach to the stewardship of the risks we take on through buy-ins and buyouts. Efficient management of risk capital has been a cornerstone of our long-term strategy and helps to ensure PIC remains a safe haven for our policyholders’ promised benefits.”

In 2012 PIC completed its 50th pension insurance transaction and almost £1.5 billion of new business.

Last week Swiss Re announced a reinsurance agreement with UK insurer LV= which saw them take on £800m ($1.3 billion) worth of longevity risks.

These large, longevity risk focused, reinsurance transactions are expected to become more frequent as the longevity risk transfer and longevity swap market grows. At some point we expect the capital markets to be tapped by another firm looking to offload longevity risk, whether that will be one of the reinsurers who are taking on large volumes of this risk remains to be seen.

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