Prudential Retirement longevity reinsurance contracts hit £2bn for 2019

Prudential Retirement has revealed that it has already concluded around £2bn (US$2.6bn) of longevity reinsurance contracts in 2019.

Publishing an update, Prudential Retirement, a unit of Prudential Financial, said the previously undisclosed longevity reinsurance contracts, are an important signal to the unprecedented start of the 2019 UK pension risk transfer market.

The transactions have resulted in Prudential Retirement taking on the longevity risks of around 16,000 pensioners.

It believes that the high number of transactions has been driven in part by pension schemes seeking to close agreements prior to the original 29 March Brexit deadline. However, with this extended until late October 2019, it thinks that pensions that have not yet transacted have an unexpected window to move forward and de-risk.

Furthermore it said that demand for de-risking solutions has also been driven by the robust funded status of UK. schemes, which have improved markedly since 2016. The funding level of the average UK pension scheme stood at 100.1 per cent on March 29, putting many in a favourable position to reduce risks.

Commenting, Prudential Financial head of longevity reinsurance Amy Kessler said: “Pension schemes that can afford to de-risk have raced forward in the opening months of 2019, taking advantage of the window before Brexit to reduce their risks and lock in gains.”

She noted that Brexit brings “increasing levels of uncertainty” that could wash away recent market gains and funding improvements, putting de-risking out of reach for those with lower hedge ratios. However, she said that with funding levels at the highest levels in a decade, pensions are de-risking at an unprecedented pace.

In addition, Prudential Financial vice president, Christian Ercole, said: “Another impetus to de-risk is the notable decline in UK mortality rates during the last 10 months. The resulting level of market activity favours insurers and reinsurers who have invested in their pricing and analytics teams, and it also favours pension funds that come prepared with credible and complete data.”

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