Latest Prudential-Legal & General longevity deal marks a resurgent sector

Prudential Retirement, a unit of Prudential Financial, and Legal & General Group have concluded their sixth longevity reinsurance agreement since 2014 – a deal hailed as representing the resurgence of the longevity reinsurance sector in the UK.

The Prudential Retirement Insurance and Annuity Company (PRIAC) has assumed longevity risk for approximately $800 million in pension liabilities, which are held by Legal & General as part of its bulk annuity business.

The transaction covers more than 2,000 pensioners. Legal & General and Prudential have now partnered on six transactions that together reinsure nearly $8 billion in longevity risk. Prudential’s most recent transaction with Legal & General prior to this was in October 2016.

The agreement signals the resurgence of the market for longevity reinsurance and de-risking solutions in the UK in 2017, with market volumes up significantly since the 2016 Brexit vote. The de-risking of pension schemes has become an expectation among shareholders and key stakeholders in companies across the globe.

“Prudential is proud to strengthen its partnership with Legal & General,” said David Lang, Prudential’s lead negotiator for this transaction. “As a result of these agreements, Legal & General can better manage its longevity risk and secure the retirement benefits of thousands of UK pensioners.”

Joyeeta Kanungo, head of new business reinsurance for Legal & General, said: “This transaction marks a furthering of our partnership with Prudential, whose expertise and strength we value highly. The transaction is also another example of longevity reinsurance having a positive impact in enabling U.K. pension schemes to de-risk efficiently with a strong insurer such as Legal & General.”

Bill McCloskey, Prudential’s head of transactions for international longevity reinsurance, said: “The longevity reinsurance market is more vibrant than ever, especially in the UK. With this agreement, Legal & General is tapping into Prudential’s unique ability to keep up with the huge demand in the market today, and benefits from our use of predictive analytics and the strongest transaction team in the industry. These investments have enabled Prudential to develop and sustain meaningful relationships with its insurance counterparties.”

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