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Pension Corp seals $1.2bn longevity reinsurance deal

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UK specialist insurer Pension Insurance Corporation (PIC) has reinsured against increases in life expectancy four of the pension schemes it administers.

PIC agreed the transaction – worth $1.2bn (€1bn) – with Prudential Retirement, part of US-based Prudential Financial. It is the fifth such deal between the two companies, with nearly $5bn worth of liabilities reinsured in total, according to Prudential’s head of transactions for international longevity reinsurance, William McCloskey.

“These agreements help PIC to manage longevity risk and thereby secure the retirement benefits of thousands of UK pensioners,” McCloskey added.

Khurram Khan, head of longevity risk at PIC, said: “Prudential is now an established longevity reinsurance market participant. This latest agreement covers four sizeable transactions executed by PIC during 2017.

“The collaborative nature of the talks and speed of deal completion highlight the things we value in a partnership. Over 2017 to date, PIC has now reinsured around £3bn [€3.4bn] of longevity risk in support of an excellent year for new business.”

In a press release announcing the deal, Prudential said it highlighted “rebounding demand for pension derisking solutions”, in particular longevity reinsurance.

In July PIC reinsured £1bn worth of liabilities with SCOR, the first time PIC had worked with this company.

PIC has taken on liabilities worth more than £2bn in 2017 so far through buy-in and buyout transactions, including:

  • £600m buy-in for the Wolseley Group Pension Plan
  • £400m buy-in for the pension scheme of engineering firm Vesuvius
  • two deals worth a combined £350m for schemes sponsored by energy company SSE
  • £200m buy-in for the 3i Group Pension Plan
  • £190m buyout of GKN Group Pension Scheme
  • £130m buy-in for the TI Group Pension Scheme
  • £100m buy-in for Alcatel-Lucent Pension Scheme
  • £90m buy-in for Civil Aviation Authority Pension Scheme
  • £33m buyout of the Alps Electric (UK) Limited Pension Scheme

The PIC longevity swap deal was Prudential Retirement’s fourth major transaction of the year, the US firm said. Since 2011 it has reinsured $45bn worth of liabilities.

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