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Prudential transacts another $3.2bn of longevity reinsurance


Prudential Retirement, part of Prudential Financial, Inc., says that the UK pension risk transfer market is experiencing healthy growth, as signalled by its closing of a further $3.2 billion of longevity reinsurance deals in recent months.

The $3.2 billion of longevity reinsurance transactions are new and as yet undisclosed deals that Prudential has entered into with insurers backing UK pension schemes.

Prudential explains that the activity is a “further sign that pension de-risking activity in the U.K. is continuing at a brisk pace.”

As part of these newly disclosed transactions, The Prudential Insurance Company of America (PICA) is assuming the longevity risk of approximately 13,200 retirees.

Amy Kessler, head of longevity risk transfer at Prudential, commented, “The average U.K. pension scheme is at or near full funding, a material improvement over the last two years. That is happening at the same time longevity improvements have slowed, which has made pension de-risking more affordable than it has been in years. Pensions are actively taking advantage of this environment by locking in these gains and transferring risk, knowing that such periods don’t last forever.”

These new longevity reinsurance arrangements by Prudential follow at least 10 others over the last year that are $1 billion or more in size, all of which are detailed in our Longevity Risk Transfer Deal Directory.

Prudential says that the high levels of UK longevity reinsurance and longevity swap activity means that 2018 is building toward one of the best years on record for this market.

How this will eventually impact availability of capacity remains to be seen, but some in the ILS fund market are watching and hoping they have a chance to augment longevity reinsurance capacity for pensions more regularly in transactions to come.

“The unprecedented level of market activity in 2018 favors insurers and reinsurers who have invested in their pricing teams and analytics. It also favors pension schemes that come prepared with credible and complete data,” explained David Lang, vice president at Prudential Financial. “And while there is plenty of insurer and reinsurer capital for these transactions, the biggest factor constraining the market today is the human capital needed to bring deals through to closing.”

With pension risk transfer a hot topic, driven largely by longevity risk transfer needs still, the expectation is that activity levels will remain high, helped by pensions in the UK being increasingly well-funded.

Prudential says it has now completed more than $50 billion in international pension reinsurance transactions since 2011.

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

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