Prudential closes $2.6bn pre-Brexit pension longevity reinsurance deals

Prudential Retirement, part of Prudential Financial, Inc., says that the UK pension risk transfer market hass experienced a rush to finalise de-risking deals in advance of Brexit, evidenced by its closing of a further $2.6 billion of longevity reinsurance transactions at the start of 2019.

These previously undisclosed longevity reinsurance contracts are an “important signal of an unprecedented start to the 2019 U.K. pension risk transfer market,” Prudential explained this morning.

The $2.6 billion of longevity reinsurance transactions see Prudential Retirement assuming the longevity risks of approximately 16,000 additional pensioners, the company said.

Prudential believes that UK pension funds have been rushing to secure de-risking solutions in advance of Brexit, with the desire to close agreements prior to the original March 29th Brexit deadline drove a rush of deals at the start of this year.

Now that Brexit has been delayed to October, other pension funds have a window of opportunity to move forward with their de-risking plans as well.

Amy Kessler, head of longevity reinsurance at Prudential Financial, commented, “Pension schemes that can afford to de-risk have raced forward in the opening months of 2019, taking advantage of the window before Brexit to reduce their risks and lock in gains.

“Brexit brings increasing levels of uncertainty that could wash away recent market gains and funding improvements, putting de-risking out of reach for those with lower hedge ratios. But with funding at the highest levels in a decade, pensions are de-risking at an unprecedented pace.”

De-risking demand has also been driven by the well-funded state of pensions in the UK, Prudential said, with the average pension being funded to just slightly over 100% at March 29th, putting many in a favorable position to reduce their longevity risks.

“Another impetus to de-risk is the notable decline in U.K. mortality rates during the last 10 months,” added Christian Ercole, vice president at Prudential Financial. “The resulting level of market activity favors insurers and reinsurers who have invested in their pricing and analytics teams, and it also favors pension funds that come prepared with credible and complete data.”

Prudential has now completed over $60 billion of longevity reinsurance transactions since 2011.

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

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