Prudential Retirement is assuming the longevity risks of approximately 16,000 pensioners in the UK as part of previously undisclosed and now completed longevity reinsurance contracts worth $2.6 billion.
In an announcement, the Prudential Financial unit explained: “This early 2019 de-risking wave has been driven in part by many pensions seeking to close agreements prior to the original March 29 Brexit deadline. But with the Brexit deadline extended until late October, pensions that have not yet transacted have an unexpected window to move forward and de-risk.”
Known for the massive $27.7 billion transaction involving the BT Pension Scheme, the pension reinsurance market specialist added that demand for de-risking solutions has been driven by the robust funded status of UK schemes. It noted that the funding level of the average UK pension scheme stood at 100.1% on March 29.
“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,” noted Amy Kessler, head of longevity reinsurance at Prudential Financial.
“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. But with funding at the highest levels in a decade, pensions are de-risking at an unprecedented pace.”
Meanwhile Prudential Financial vice president Christian Ercole commented: “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.”
