PIC sees growing longevity reinsurance market capacity

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Pension Insurance Corporation plc, a specialist defined benefit pension fund insurer, said it has increased its use of longevity reinsurance and notes that market capacity is on the rise for deferred pension risks, while standardisation of the transactions is increasing.

pension-insurance-corp-logoPIC has been particularly active in insuring pension fund members in 2019 so far, having concluded £5.8 billion of buyouts and buy-ins with trustees of defined benefit pension schemes this year.

To support its growing book of pension risk and this newer activity, PIC has also entered into longevity reinsurance arrangements worth £7 billion in the first-half of 2019.

Included within this longevity reinsurance activity is the reinsurance of almost £1.5 billion of deferred (non-pensioner) lives, PIC explained today.

This marks the first time such a large pool of deferred lives has been reinsured in any one period, PIC said, which it believes “signals increased capacity for this type of risk within the reinsurance market.”

The £7 billion of longevity reinsurance activity covers the lives of pensioners in schemes PIC has insured in 2019, as well as longevity exposure accumulated from prior year pension insurance activity.

More than 70% of PIC’s total longevity exposure has been reinsured, across signed treaties with 11 highly rated reinsurance counterparties. In 2018 PIC completed £5.6 billion of longevity reinsurance.

Jay Shah, Chief Origination Officer at PIC, said: “This has been a record-breaking first half for PIC both in terms of the amount of new business transacted and longevity risk re-insured. On the longevity reinsurance we are especially pleased to have insured such a large amount of deferred lives.

“This is a significant development for the reinsurance market, where we are now starting to see the standardisation of these types of deals, which we have had for several years for pensioner deals.”

Further standardisation in longevity risk transfer bodes well for continued growth of the market and an increasing need for longevity reinsurance capacity as a result.

Read about many historical longevity swap and reinsurance transactions in our Longevity Risk Transfer Deal Directory.

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