Pension Insurance Corporation (PIC) has transferred the longevity risk of £900m (€1bn) of pension liabilities to the Prudential Insurance Company of America in the latest of a series of reinsurance deals between the two firms.
The move, which covers approximately 7,500 pensioners across two pension plans, is the latest reinsurance deal to capitalise on the underlying buoyancy of the de-risking market.
“We believe the reinsurance market will continue to be competitive in support of the significant de-risking activity expected over 2018,” said Jay Shah, chief origination officer at PIC.
One estimate from Hymans Robertson, the consultancy firm, suggested that the underlying bulk annuity market could see approximately £700bn of DB scheme assets and liabilities transferred to insurance companies by 2032, equivalent to £50bn a year.
Amy Kessler, head of longevity risk transfer at Prudential, said: “Over the last several years, Prudential’s longevity reinsurance innovations have proven time and again to help companies achieve certainty in their liabilities.”
The transaction represents the first large-scale longevity reinsurance deal by Prudential this year.
Prudential has assumed a total of $6bn (€5bn) through reinsurance deals with PIC since 2015. Most recently, the UK-based specialist insurer offloaded longevity risk in a deal worth $1.2bn in November 2017.
Earlier this year as an extension of the two companies’ partnership PIC and Prudential launched a partially automated de-risking service for pension funds of less than £200m in size, which typically find it expensive to secure buy-ins and buyouts.
In the past year Prudential has also backed longevity swap deals with insurer Scottish Widows and the UK pension fund of Marsh & McLennan Companies.
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