Prudential Retirement and Aviva Life and Pensions have signed their first longevity reinsurance deal, amid growing demand for de-risking among UK pension schemes.
The agreement will see Prudential’s reinsurance division take on the longevity risk of approximately £1bn of Aviva’s pension liabilities.
Prudential Retirement has recently struck a number of major reinsurance deals, including six deals covering a total of $6bn (£4.66bn) of longevity risk with the Pension Insurance Corporation alone. The firm now holds $433bn (£336bn) in retirement account values.
Funding levels of UK pension schemes have improved over the past year, driven in particular by a marginal rise in long-term gilt yields, providing relatively affordable opportunities for UK pension schemes to address longevity risks through reinsurance deals.
Amy Kessler, head of longevity risk transfer at Prudential, comments: “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.”
