The Prudential Insurance Company of America has entered into an agreement to provide longevity reinsurance to a captive insurance company of the BT Pension Scheme ("Scheme"), in the largest longevity reinsurance transaction on record, to date.
Through this transaction, the Scheme transferred longevity risk (the risk that members and dependants will live longer than expected) through an insurance agreement with its captive insurer. PICA then agreed to reinsure longevity risk from this insurer, in exchange for premiums and risk fees. These arrangements cover over 25% of the Scheme’s total exposure to improvements in longevity, covering some £16 billion ($27.7 billion) of the Scheme’s liabilities, (measured on an economic basis at October 2013, the date the insurance and reinsurance commences).
These insurance and reinsurance arrangements will help increase the retirement security of the Scheme's members, by providing greater protection against members living longer than expected.
Prudential's insurance, pension and actuarial expertise, as well as its investment capabilities and financial strength, uniquely positioned it to be a reinsurer of this large and complex transaction.
Over the last decade, market volatility has reshaped the defined benefit (DB) pension plan landscape. Many corporations hold a disproportionate amount of risk in their pension plan, and are re-thinking how best to align those risks toward the core business.
Companies are pursuing strategies to address rising funded status – but there is no “one size fits all” approach.
Chief financial officers, treasurers, boards of directors, chief investment officers and trusted advisors have been shifting priorities from maximizing returns to pension de-risking. In fact, 48% of CFOs have already implemented or are planning to implement a pension risk transfer through buy-in or buy-out strategies.
Prudential’s approach to Pension Risk Transfer is fundamentally different. We don’t see PRT as a product. Prudential can help architect the unique combination of solutions and timing to protect and deliver promised benefits within the context of fiduciary and regulatory requirements and your core business.
Since 1928, Prudential has helped over 5,700 pension risk transfer clients provide and protect retirement security for more than 1.6 million people.
Prudential is proud and honored to be the largest provider of pension risk solutions in the United States. From the Cleveland Public Library pension risk transfer agreement in 1928 to the groundbreaking $25 billion General Motors Retirement Program for Salaried Employees transaction in 2012, each client is unique and intrinsically important.
De-risking can seem like a complex process, and our team of dedicated PRT experts is here to work alongside you as we design and execute a strategy to meet your particular challenges and strategic goals.
"Pension risk transfer transactions exemplify our capabilities, culture of multi-disciplinary collaboration, and financial strength. It’s not only about pricing. It’s about the confidence a client has in a high-quality close and execution, and doing it on a timely basis. We have very good marks for this in the industry. I doubt that any other insurer has started as early or invested as heavily as we have in this area. . . it involves risks that we know and manage well."
John R. Strangfeld, Chairman and Chief Executive Officer