longevity risk

The global longevity risk transfer market is primed for further growth as pension funds increasingly look to de-risk their pensions plans and, similar “catalysts that transformed” the U.K. longevity reinsurance sector begin to make moves in the U.S. and elsewhere, says Amy Kessler.

Heineken, which acquired the UK business of Scottish & Newcastle in 2009, has announced that it has completed a longevity hedging and reinsurance transaction with Friends Life Limited, now part of insurer Aviva Group, transferring £2.4 billion of longevity risk.

Recent high levels of activity in the UK pension risk transfer market, featuring longevity swaps and longevity reinsurance transactions, are being driven by insurance companies drive to meet Solvency II requirements.

The Brazilian pension fund market faces growing longevity risk and the regulator is calling for insurers to create products to address this, which will result in new opportunities for the longevity swap and reinsurance providers to tap into a new geographic region.

Longevity is the biggest risk facing corporate pension schemes in the UK and Germany and more likely to cause deficits than low-interest rates, according to Fitch Ratings, which underscores the expected increase in demand for longevity risk transfer and reinsurance.

One of the subsidiaries of Prudential Financial Inc. has entered into a new longevity reinsurance arrangement with UK-based insurer Legal & General Group, covering $2.9 billion of its pension liabilities against the risk of longevity improvements.

The €6 billion longevity risk transfer hedge completed recently by Dutch headquartered life, pensions and annuities focused insurer Aegon, which Artemis covered here yesterday, was supported by reinsurance capacity from Canada Life Re.

Dutch headquartered life, pensions and annuities focused insurer Aegon has completed its third longevity risk transfer transaction, hedging €6 billion of longevity reserves in the Netherlands to further reduce its exposure to longevity improvements.

As the longevity reinsurance market continues to grow in volume and expand its reach, executives from Reinsurance Group of America (RGA) highlighted a competitive sector during the first-six months of the year.

The pioneering structure and model of Swiss Re’s 2010 Kortis Capital Ltd. longevity-linked insurance-linked securities (ILS) lays the foundation for successfully transferring longevity risks to the capital markets, according to research by the Pensions Institute at Cass Business School.