Prudential Reinsures Over $2 Billion of Longevity Risk from the MMC UK Pension Fund

In the largest longevity risk transfer for a U.K. pension fund since 2014, Prudential and Canada Life Reinsurance were chosen to reinsure the longevity risk for around 7,500 plan participants, approximately $4.3 billion (£3.4 billion) in pension liabilities, for the MMC UK Pension Fund. Mercer was the Fund’s advisor. The longevity risk was transferred efficiently, using a captive approach, to the reinsurance market through Guernsey incorporated cells. The reinsurance is divided equally between The Prudential Insurance Company of America (PICA) and Canada Life Reinsurance. This transaction lowers the risk that Marsh & McLennan Companies will face unexpected pension contributions due to an increase in pensioner life expectancy. 

“This transaction reflects the fact that de-risking is the new normal,” according to Amy Kessler, head of longevity risk transfer at Prudential. “In every industry peer group, companies are choosing to reduce the longevity risk embedded in their pensions through buy-ins, buy-outs and longevity hedging. Today, a full range of solutions exist to help secure pension promises and reduce risk to funding levels.”

This is Prudential’s second reinsurance agreement using a captive structure: The first was the record $28 billion (£16 billion) longevity risk transfer transaction for the British Telecom Pension Scheme in 2014.

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