longevity risk

The Life & Longevity Markets Association (LLMA) and the Institute and Faculty of Actuaries (IFoA) have set up a research team, to be led by Macquarie University, which will seek to develop a method for assessing the basis risk of longevity risk transfer transactions.

Prudential has completed a third longevity reinsurance transaction with UK insurer Legal & General, helping the company to better manage its pension liabilities by offloading more of its longevity risk associated with bulk annuities.

London-based Pension Insurance Corp. (PIC) increased the volume of longevity exposure it reinsured in 2015 to £3.8 billion, supporting the growing trend of specialist pension insurers utilising longevity reinsurance capacity to manage their exposures.

Prudential plc, the UK domiciled life insurance, health, pensions and financial services group, significantly increased its longevity reinsurance protection in 2015, buying enough protection to cover an additional £6.4 billion of annuity liabilities.

The use of longevity hedging instruments, such as swaps and reinsurance, is expected to grow in 2016, with longevity risk increasingly on the agenda for pension funds, while reinsurer appetite for assuming longevity risks remains strong, according to Willis Towers Watson.

The Bank of England’s Prudential Regulation Authority (PRA) is seeking to ensure that it has a sufficient level of oversight of the longevity risk transfer and reinsurance market as it evolves, stressing the need for transactions to feature a true transfer of risk.

Willis Towers Watson, the insurance and reinsurance broker and global professional services firm, says that it expects over £20 billion of longevity risk transfer and longevity swap or hedging deals in 2016, but with the year starting slowly.

The market for longevity swaps and risk transfer is forecast to be busy again in 2016, by Aon Hewitt, with a continued focus on bringing longevity reinsurance capacity more efficiently to smaller pension funds as well as larger deals.

UK headquartered insurance and pensions specialist Legal & General (L&G) and German headquartered reinsurance firm Hannover Re have teamed up to complete a €200 million European pension risk transfer and reinsurance deal.

Consultancy Mercer, insurance firm Zurich and reinsurance firm Pacific Life Re have assisted an unnamed UK pension plan to offload the longevity exposure associated with a “named life” group of pensioners in a streamlined longevity hedge.