US-based Prudential Financial, Inc. (PFI) has closed its first reinsurance transaction involving an unnamed UK pension scheme – with Zurich Assurance Ltd acting as intermediary.
The transaction, which closed in March of 2021, transfers longevity risk associated with £6bn of pensioner liabilities. It is Prudential’s third-largest UK longevity risk transfer transaction to date.
According to PFI, this transaction uses a “limited recourse” or “pass-through structure”, meaning the longevity and default risks are able to be passed through the insurer. It was the first transaction involving this type of structure entered into by Prudential Retirement.
In addition, Willis Towers Watson (WTW), served as lead adviser to the trustee and joint working group for the transaction.
Ian Aley, head of transactions at WTW, said: “This transaction demonstrates the robustness of the longevity reinsurance market, with U.K. pension scheme trustees continuing their keen focus on removing risk.
“This is the third longevity reinsurance transaction we have partnered with Prudential on in recent years, transferring in total more than £30bn of longevity risk and enabling the trustees to progress their de-risking journeys.”
Greg Wenzerul, head of longevity risk transfer, Zurich Assurance Ltd, added: “There are many ongoing benefits for a UK. Trustee in using a regulated U.K. insurance company for longevity risk insurance in this capacity, including cost certainty for the life of the transaction.
“For many sophisticated trustees of UK defined benefit pension schemes, the immediate removal of longevity risk, whilst using scheme assets in the most efficient and risk-aware manner, will continue to represent the optimal route to eventually secure all their liabilities.”