Prudential closes $2.6bn longevity reinsurance deals in pre-Brexit rush

Prudential Retirement, a unit of Prudential Financial, has completed approximately $2.6 billion in previously undisclosed longevity reinsurance contracts, assuming the longevity risks of about 16,000 pensioners, ahead of Brexit.

Prudential said the transactions highlights an "unprecedented start to the 2019 UK pension risk transfer market".

According to the company, the UK pension risk transfer market experienced a rush at the start of this year to finalise the de-risking agreements prior to the original March 29 Brexit deadline.

Now that the Brexit deadline has been extended until late October, pensions that have not yet transacted have an unexpected window to move forward and de-risk.

“Pension schemes that can afford to de-risk have raced forward in the opening months of 2019, taking advantage of the window before Brexit to reduce their risks and lock in gains,” said Amy Kessler, head of longevity reinsurance at Prudential Financial.

“Brexit brings increasing levels of uncertainty that could wash away recent market gains and funding improvements, putting de-risking out of reach for those with lower hedge ratios. But with funding at the highest levels in a decade, pensions are de-risking at an unprecedented pace,” Kessler added.

Christian Ercole, vice president at Prudential Financial, added: “Another impetus to de-risk is the notable decline in U.K. mortality rates during the last 10 months. The resulting level of market activity favours insurers and reinsurers who have invested in their pricing and analytics teams, and it also favours pension funds that come prepared with credible and complete data.”

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