Prudential Retirement, a unit of Prudential Financial, Inc. (NYSE:PRU), has concluded $3.2 billion in previously undisclosed longevity reinsurance contracts, a further sign that pension de-risking activity in the U.K. is continuing at a brisk pace. As part of these transactions, The Prudential Insurance Company of America (PICA) assumes the longevity risk for approximately 13,200 retirees.
The market for pension de-risking solutions is expanding at its fastest pace in years, in part because such activity has become more affordable than at any point in the last decade. The affordability of pension buy-ins and buy-outs is due in part to the improved funded status of U.K. schemes, which, on average, were at or near full funding in the summer of 2018. This improvement in funded status represents a marked increase over the last two years.
Amy Kessler, head of longevity risk transfer at Prudential, said: The average U.K. pension scheme is at or near full funding, a material improvement over the last two years. That is happening at the same time longevity improvements have slowed, which has made pension de-risking more affordable than it has been in years. Pensions are actively taking advantage of this environment by locking in these gains and transferring risk, knowing that such periods dont last forever.
These agreements follow at least 10 others during the last 12 months that are $1 billion or more in size. Collectively, these U.K. longevity reinsurance and longevity swap agreements are building toward one of the best years on record in this market, driven by pension schemes eager to capitalize on their improved funded status and take risk off the table.
The unprecedented level of market activity in 2018 favors insurers and reinsurers who have invested in their pricing teams and analytics. It also favors pension schemes that come prepared with credible and complete data, said David Lang, vice president at Prudential Financial. And while there is plenty of insurer and reinsurer capital for these transactions, the biggest factor constraining the market today is the human capital needed to bring deals through to closing.
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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 Prudential Financial, Inc.
Prudential Financial, Inc. (NYSE: PRU), a financial services leader with more than $1 trillion in assets under management as of June 30, 2018, has operations in the United States, Asia, Europe and Latin America. Prudentials 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.
Prudential Retirement delivers retirement plan solutions for public, private, and nonprofit organizations. Services include defined contribution, defined benefit and non-qualified deferred compensation record keeping, administrative services, investment management, comprehensive employee education and communications, and trustee services, as well as a variety of products and strategies, including institutional investment and income products, pension risk transfer solutions and structured settlement services. With more than 85 years of retirement experience, Prudential Retirement helps meet the needs of 4.3 million participants and annuitants. Prudential Retirement has $433 billion in retirement account values as of June 30, 2018. Retirement products and services are provided by The Prudential Insurance Company of America (PICA), Newark, N.J., or its affiliates.
Reinsurance contracts are issued by either Prudential Retirement Insurance and Annuity Company (PRIAC), Hartford, Conn., or PICA. Both are wholly owned subsidiaries of Prudential Financial, Inc., and each company is solely responsible for its financial condition and contractual obligations. Neither PRIAC nor PICA is licensed or regulated by the U.K. Prudential Regulation Authority as an insurer or regulated by the Financial Conduct Authority, nor does either conduct business in the United Kingdom or provide direct insurance to any individual or entity therein. Prudential Financial, Inc. of the United States is not affiliated with Prudential plc, a company headquartered in the United Kingdom.
Gregory Roth, Direct: 973-802-6585