Longevity reinsurance news

Prudential Retirement, a division of Prudential Financial Inc., has completed its fifth longevity reinsurance transaction with Rothesay Life. The latest deal sees Prudential covering pension liabilities amounting to $450m for the insurer.

Pension fund sponsors of longevity swaps can as much as halve the transaction costs by establishing their own special purpose insurance or captive vehicle, or using a service provider, in order to more directly access sources of longevity reinsurance capital.

The UK’s Merchant Navy Officers Pension Fund (MNOPF) has completed a direct longevity hedge or swap transaction with £1.5 billion of its members longevity risk ultimately being reinsured by life and longevity focused reinsurance firm Pacific Life Re.

Traditional insurance and reinsurance firms should expect an increasing amount of competition for longevity risks and longevity reinsurance transactions from capital markets participants, according to rating agency A.M. Best in a report on pension risk transfers.

Life, mortality and longevity focused reinsurance firm Pacific Life Re has provided life, annuities and pension risk transfer insurance firm Rothesay Life with longevity reinsurance protection covering £1 billion of its liabilities during 2014.

The International Association of Insurance Supervisors (IAIS) estimates that for every year that longevity risk is underestimated by risk holders, such as pension funds, insurers or reinsurers, the liability to them could be increasing by as much as $1 trillion.

Pension Insurance Corporation (PIC), one of the specialist providers of insurance and risk transfer solutions for defined benefit pension funds, has utilised over £2 billion worth of longevity reinsurance capacity from global reinsurers in 2014.

Towers Watson has launched Longevity Direct, a service that aims to give pension schemes direct access to the reinsurance market for longevity risk transfer, giving them a dedicated cell that can be used to write re/insurance for longevity swap transactions.

With life expectancies set to continue improving, the OECD yesterday called for the capital markets to offer additional capacity for the hedging of longevity risk, but said that longevity risk instruments need to be standardised to increase transparency and liquidity.

A newly published piece of paper provides, what researchers are calling, a novel readily applicable methodology allowing insurers and pension schemes to assess the basis risk associated with index-based longevity swap transactions.