Amid surging demand for pension de-risking
May 09, 2018 — NEWARK, N.J.–(BUSINESS WIRE)–Prudential Retirement, a unit of Prudential Financial, Inc. (NYSE: PRU), and Pension Insurance Corporation plc (PIC), have struck their sixth longevity reinsurance transaction since 2015. The Prudential Insurance Company of America (PICA) assumes the longevity risk for £900 million (about $1.2 billion) in pension liabilities, representing approximately 7,500 pensioners across two pension schemes.
This agreement signals strong demand for longevity reinsurance in the U.K., especially as a result of the growing desire among companies to de-risk their pensions. This desire has become more achievable due to the improved funding levels of U.K. schemes, many of which have spent several years progressively de-risking their liabilities. They are now well placed to do a buyout or buy-in. PIC and Prudential have long been leaders and innovators in providing de-risking solutions.
Access to De-Risking
“We at Prudential are proud to strengthen our growing partnership with Pension Insurance Corporation,” said Tom Cahill, a director on Prudential’s longevity reinsurance team. “Our two teams have not only worked closely on several transactions, but we have also collaborated on innovative new processes that have helped smaller schemes access the pension de-risking marketplace.” The two firms concluded their last longevity reinsurance agreement in November 2017. Overall, they have come to agreements collectively worth more than $6 billion (about £4.4 billion).
Jay Shah, chief origination officer at Pension Insurance Corporation, said: “This agreement represents the sixth major reinsurance transaction between the PIC and PICA teams during the past three years. It is testament to the collaborative partnership that has been built. We believe the reinsurance market will continue to be competitive in support of the significant de-risking activity expected over 2018.”
Amy Kessler, head of longevity risk transfer at Prudential, added: “Over the last several years, Prudential’s longevity reinsurance innovations have proven time and again to help companies achieve certainty in their liabilities. Insurers like PIC come to us for our reinsurance expertise, our deep capabilities, and our capacity to innovate in ways that meet the changing needs of institutions. Most importantly, we have worked closely with PIC to help them secure the pension benefits for thousands of people.”
This is Prudential’s first major longevity reinsurance transaction of 2018. Prudential is a global leader in the pension reinsurance market with more than $50 billion in international reinsurance transactions since 2011, including the largest longevity risk transfer transaction on record, a $27.7 billion transaction involving the BT Pension Scheme.
About Pension Insurance Corporation
The purpose of Pension Insurance Corporation plc (PIC) is to pay the pensions of its policyholders. PIC provides secure and stable retirement incomes through leading customer service, comprehensive risk management and excellence in asset and liability management. At year-end 2017, PIC had insured 151,600 pension scheme members and had £25.7 billion in financial investments, accumulated through the provision of tailored pension insurance buyouts and buy-ins to the trustees and sponsors of U.K. defined benefit pension schemes. Clients include FTSE 100 companies, multinationals and the public sector. PIC is authorized by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority (FRN 454345). For further information please visit www.pensioncorporation.com.
About Prudential Financial, Inc.
Prudential Financial, Inc. (NYSE: PRU), a financial services leader with more than $1 trillion in assets under management as of March 31, 2018, has operations in the United States, Asia, Europe, and Latin America. Prudential’s diverse and talented employees are committed to helping individual and institutional customers grow and protect their wealth through a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds and investment management. For more information, please visit news.prudential.com.