longevity risk

Global insurance player Zurich has completed another longevity swap transaction, helping a smaller UK pension plan to cover £300 million of its longevity related pension liabilities, with SCOR providing the reinsurance capacity to back the deal.

Activity in the pension scheme longevity swap and hedging market should increase in 2017 as a number of market forces that slowed activity this year bed in, and pensions become more of a focus for reinsurance capital, according to Shelly Beard of Willis Towers Watson.

The Canada Life Assurance Company has helped the pension plan of the Canadian Bank Note Company, Limited to a streamlined longevity swap, a $35 million transfer of longevity risk associated with its pensioners which is the smallest transaction we’ve seen at Artemis.

Reinsurance Group of America (RGA) has entered into a €1.3 billion longevity swap and reinsurance agreement with AXA France, a deal that covers over 15,000 annuitants.

Due to a dislocation in current pricing for longevity swaps, caused by lower rates of improvement in mortality in the UK, retirement and health advisory Aon Hewitt, a division of the global insurance and reinsurance broker, has warned pension schemes to delay any longevity transactions for the moment.

Insurance group Zurich has completed another longevity swap transaction, helping an unnamed pension fund enter into a risk transfer arrangement covering £50m of pension longevity liabilities and with 75% of the risk transferred to reinsurance firm Pacific Life Re.

Insurance or reinsurance sidecar vehicles will be put to work to enable investors to co-invest alongside insurers and reinsurers in the pension and longevity risk transfer market, predicts Prudential’s Amy Kessler.

Growth in longevity reinsurance and longevity risk transfer business could help life reinsurers to elevate their returns on equity (ROE) above 10%, but at the same time there is an expectation that growing demand for longevity capacity will change reinsurers risk profiles, according to S&P.

Insurance group Zurich has completed two longevity swap transactions with pension funds of the Pirelli group, between them covering £600m of pension longevity liabilities and with 75% of the risk transferred to reinsurance firm Pacific Life Re.

Demand for longevity reinsurance and risk transfer among UK life insurers could rise, as their Solvency II ratios have fallen in the wake of lower investment yields and the fallout from the Brexit vote.