RGA to reinsure €7bn Aegon longevity risk

Dutch insurance group  Aegon has reinsured an additional part of its longevity exposure in the Netherlands with Reinsurance Group of America, Incorporated (RGA) to protect itself against the potential adverse financial impact of longevity risk over the full life of the policies at an “attractive” cost of capital.

The transaction aims to improve the risk profile of the Dutch Life business and release capital at attractive terms, it said. As a result of actions taken over the past year, Aegon expects to increase the regular remittances from this business.

The reinsurance agreement provides protection against the longevity risk associated with €7 billion of pension liabilities. The risk transfer is effective per December 31, 2021 and will continue until the reinsured block of business has run off in full. The transaction includes deferred pensioners as well as in-payment policies of pensioners and dependents, leading to a very long run-off period.

The transaction follows a similar longevity reinsurance structure executed by Aegon in December 2019. Together, these agreements mitigate approximately 40 percent of the longevity risk exposure of the Dutch life business.

“This longevity reinsurance agreement is another bilateral action taken to maximise the value of our Dutch Life business,” said Lard Friese (pictured), chief executive officer of Aegon N.V. “In line with our strategy, this builds on actions we have previously taken to improve the risk profile of this business and is another step to generate stable, regular, and reliable cash flows from the Dutch Life business.”

Aegon expects to increase the regular quarterly remittances of the Dutch Life business from €25 million to €50 million per quarter as of the first quarter of 2022. This follows management actions taken over the past year to strengthen the capital position, improve the risk profile, and increase capital generation.

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