Prudential & PIC in $1.2bn sixth longevity reinsurance transaction


Prudential Retirement and Pension Insurance Corporation (PIC) have entered into their sixth longevity reinsurance arrangement, a $1.2 billion deal covering around 7,500 pensioners, taking the total longevity risk Prudential Financial has reinsured for PIC to over $6 billion.

Prudential Retirement, a unit of Prudential Financial, Inc., said that currently it is seeing “surging demand for pension de-risking” making the provision of longevity reinsurance increasingly important to players like PIC, who insure large numbers of pensioners.

This is the sixth arrangement between the pair since 2015, with the most recent being another $1.2 billion longevity reinsurance deal in November 2017 and the setting up of an innovative flow longevity reinsurance facility earlier in 2018.

The latest deal sees Prudential Insurance Company of America (PICA) assuming the longevity risk for £900 million (around $1.2 billion) of pension liabilities, covering roughly 7,500 pensioners across two pension schemes from the UK.

The company said that it is seeing “strong demand for longevity reinsurance in the U.K., especially as a result of the growing desire among companies to de-risk their pensions.”

Improved pension scheme funding levels have made longevity risk transfer more achievable for pensions in the UK, with many now well-placed to enter into buyout or buy-in arrangements, where reinsurance capacity can be crucial to deal execution.

“We at Prudential are proud to strengthen our growing partnership with Pension Insurance Corporation,” commented Tom Cahill, a director on Prudential’s longevity reinsurance team. “Our two teams have not only worked closely on several transactions, but we have also collaborated on innovative new processes that have helped smaller schemes access the pension de-risking marketplace.”

Jay Shah, chief origination officer at Pension Insurance Corporation, further explained, “This agreement represents the sixth major reinsurance transaction between the PIC and PICA teams during the past three years. It is testament to the collaborative partnership that has been built. We believe the reinsurance market will continue to be competitive in support of the significant de-risking activity expected over 2018.”

Amy Kessler, head of longevity risk transfer at Prudential, added, “Over the last several years, Prudential’s longevity reinsurance innovations have proven time and again to help companies achieve certainty in their liabilities. Insurers like PIC come to us for our reinsurance expertise, our deep capabilities, and our capacity to innovate in ways that meet the changing needs of institutions. Most importantly, we have worked closely with PIC to help them secure the pension benefits for thousands of people.”

Prudential said that this transaction is its first major longevity reinsurance deal of 2018.

However, it isn’t the first for PIC, which has already secured £725 million of longevity reinsurance from a deal with Bermudian reinsurer PartnerRe.

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

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