Pension Insurance Corporation (PIC) has completed reinsurance deals covering £1.4bn of its own longevity exposure.
The transactions, which take PIC’s total longevity risk reinsured to more than £5bn, are with global reinsurers, including about £1.1bn with Reinsurance Group of America (RGA).
When PIC insures a pension scheme through a buyout or buy-in it takes on the risk of that scheme’s pensioners living longer than projected. PIC is therefore required to pass some of that longevity exposure on to the reinsurance market, which, because it can offset that exposure to mortality risk, is a far more efficient holder of longevity risk.
PIC chief financial officer Rob Sewell said: “2013 has been a very successful year for PIC, having insured more than £3bn of pension scheme liabilities. We are delighted with this record year, but also pleased to have been able to efficiently manage our exposure to longevity risk. For each year that life expectancy exceeds predictions, liabilities increase by about 3%. We will continue to manage our exposure to longevity risk to help ensure that our policyholders’ pensions remain secure for the long-term.”
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