Longevity reinsurance news

The level of activity in pension de-risking as a whole has been high in 2018 so far, with longevity swaps amounting to £2.3 billion transacted, along with £8.1 billion of bulk annuities deals. But Willis Towers Watson questions the availability of capacity for the end of this year.

Prudential Retirement, part of Prudential Financial, Inc. has entered into an agreement to reinsure roughly $1.4 billion (UK £1bn) of pension liability related longevity risk for Aviva Life and Pensions U.K. Ltd., the first such transaction between the two life, pension and annuity giants.

Broker Aon said this morning that the “longevity swap market is back in business” after a hiatus in activity over recent months, with a record year expected as evidenced by the recent completion of a £2 billion longevity swap and reinsurance deal involving insurer Zurich and the UK’s National Grid pension fund.

Insurer Zurich has completed its largest ever longevity swap arrangement, an intermediated arrangement that covers more than £2 billion of pensioner liabilities for the UK’s National Grid Electricity Group of the Electricity Supply Pension Scheme (ESPS).

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.

Pent-up demand for longevity risk transfer among pension schemes could make 2018 a record year for longevity swaps and reinsurance transactions, now that pricing has caught up with the latest data on mortality trends, according to Aon.

Prudential Financial and Pension Insurance Corporation (PIC) have joined forces to broaden pension de-risking for smaller pension schemes, by expediting the availability of longevity reinsurance through a flow arrangement, that sees Prudential providing guaranteed capacity to back PIC’s pension risk transfer deals.

The United Kingdom market for bulk annuity transactions, which see pensions or life operators transferring and reinsuring large portfolios of annuity liabilities, took off today with a record £12 billion reinsurance deal and continued activity in this market could eventually stimulate more longevity hedging.

The latest mortality data for the UK from the recently published new Continuous Mortality Investigation (CMI) model showing that lower levels of mortality improvement continue in England and Wales suggests that downward pressure on longevity reinsurance pricing will continue, reducing longevity swap premiums, according to Aon.

Hymans Robertson, a consultancy that facilitates pension risk transfer solutions including longevity swap and reinsurance transactions, has named Michael Abramson as a Partner and Risk Transfer Specialist, joining the company from Prudential.