PFI’s longevity reinsurance business closes reinsurance transactions worth $6bn

The Prudential Insurance Company of America (PICA), a business unit of Prudential Financial, has closed its seventh and eighth strategic longevity reinsurance transactions with Rothesay Life, reinsuring a combined $6 billion of pension liabilities associated with two bulk annuity transactions completed in the second half of 2019.

“2019 was an extraordinary year in the global risk transfer markets, having started the year at the best funded status that US, UK and Canadian pension funds had seen since the financial crisis,” said Amy Kessler, head of longevity risk transfer for PFI. “This, together with excellent asset availability, a vibrant, well-capitalised insurer and reinsurer market allowed many schemes to transact ahead of when they might have expected to and put the industry on a path to break records in 2019.

“In late 2019 and early 2020 we have observed some weakening in funded status, and many sponsors will need to monitor the market closely as strong insurer and reinsurer pricing continue to provide opportunities for sponsors to de-risk.”

Scott Gaul, who took over PFI’s Investment and Pension Solutions businesses on December 1, added: “These transactions with Rothesay Life prove the value of being prepared. They were pursued in a thoughtful and efficient manner, driven by long-term de-risking goals set by the pension schemes, culminating in the ability to transfer risk in an incredibly busy marketplace. Looking ahead to 2020, in order for opportunistic transactions to work in our extremely busy pension risk transfer markets, the scheme, consultants, insurers and reinsurers all have to be aligned, prepared, and ready to act.”

Dave Lang, vice president and PFI’s relationship manager for Rothesay, added that the two new transactions demonstrate Rothesay Life’s ability to identify a market opportunity and assemble the right team to capitalise on it. “The longstanding partnership between PFI and Rothesay Life dates back to our first transaction in 2011,” Lang said. “This trusting relationship helped get these two very important transactions done while market conditions held.”

Gaul and Kessler added that while volatility has increased, they both see a strong start to the market this year, noting activity with many small to midsize plan sponsors who are taking advantage of the current market opportunity. “In 2020, smaller transactions will be a growth area to watch, as will the burgeoning risk transfer markets in Canada and the Netherlands,” Kessler concluded.