Prudential and Aviva strike £1bn longevity deal as de-risking market ‘surges’

Prudential Retirement and Aviva Life and Pensions UK have agreed on a £1bn longevity reinsurance deal, as the surge in the de-risking market continues.

The transaction will see The Prudential Insurance Company of America assume the longevity risk in the first deal between the two companies.

According to Prudential, the uptick in deals is due to pension funds keen to capitalise on their improved funding status, driven by fresh contributions, strong investment performance and higher gilt yields.

Prudential head of longevity risk transfer Amy Kessler, said: “Market activity in 2018 is building toward a very strong second half. Rising rates and equities, combined with lower-than-expected longevity improvements, mean that pension schemes are very well-funded and that de-risking is more affordable than ever.

“Leading pension schemes are taking advantage of this favourable environment by locking in gains and transferring risk, knowing that such advantageous markets are always fleeting.”

Last month, Hymans Robertson predicted that total pension scheme buy-in and buyout volumes are set to reach an all-time record of around £18bn in 2018, after a busy first half of the year for the market.

The consultancy said that the total value of buy-ins and buyouts in the first six months of 2018 has been more than the value recorded in each year up until 2013, including 2014, which recorded a previous high of £13.2bn in transactions.

Commenting on the transaction, Prudential head of international transactions for longevity reinsurance, William McCloskey, added: “Over the last several years, Aviva has become a premier pension insurance provider, one that has made thoughtful investments in its capabilities to support the continued expansion of the UK pension risk transfer market."

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