RGA Life Reinsurance Company of Canada (RGA Canada), part of global life reinsurer Reinsurance Group of America, has completed a transaction to reinsure the longevity risk associated with 45,000 annuitants for Manulife.
RGA Canada entered into an agreement with The Manufacturers Life Insurance Company (Manulife) to provide reinsurance to cover the longevity risk associated with an in-force block of Canadian group payout annuities.
In total the deal will see RGA Canada reinsure the longevity risk for roughly 45,000 annuitants, thus securing the future payout value of the underlying annuities against annuitants living longer lives for Manulife.
“We have a long-standing partnership with Manulife and we are proud to implement another customized solution to meet their financial objectives,” explained Alka Gautam, President and CEO, RGA Canada. “This innovative longevity transaction deepens the strong collaborative relationship between RGA and Manulife.”
“RGA’s commitment to delivering long-term value to our clients drives us to develop unique solutions to meet their needs,” commented John Laughlin, Executive Vice President, Global Financial Solutions, RGA. “This transaction once again demonstrates RGA’s expertise in longevity risk and our ability to execute transactions for our clients.”
Further details on this longevity reinsurance deal are not available, but it offers a solution for those providing annuities to hedge out the longevity risk associated with them.
People living longer lives means annuities firms would have to make payments for longer, so it’s valuable to cover this risk and hedge the longevity exposure associated with a portfolio of annuity contracts.
More typically, a pension plan or a buy-in/buy-out provider might take out this type of longevity hedge, but here the annuities provider (which may not manage the pensioners itself) is removing the risk of increasing longevity of the annuitants it covers.
There remains an expectation that the capital markets will eventually have a larger role to play in hedging longevity risks, providing a welcome diversifying source of risk for ILS funds and those investing in life insurance-linked securities (ILS).
Read about numerous historical longevity swap and longevity reinsurance transactions, in our Longevity Risk Transfer Deal Directory.