Leaders of Prudential’s longevity reinsurance business optimistic about a vibrant 2020 risk transfer market after record-breaking 2019
The Prudential Insurance Company of America (PICA), a business unit of Prudential Financial, Inc. (NYSE: PRU), and a recognized leader in the global pension de-risking market, has announced the closing of its seventh and eighth strategic longevity reinsurance transactions with Rothesay Life Plc, reinsuring a combined $6 billion of pension liabilities associated with two bulk annuity transactions completed in the second half of 2019.
“2019 was an extraordinary year in the global risk transfer markets, having started the year at the best funded status that U.S., U.K. and Canadian pension funds had seen since the financial crisis,” said Amy Kessler, head of longevity risk transfer for PICA. “This, together with excellent asset availability, a vibrant, well-capitalized insurer and reinsurer market allowed many schemes to transact ahead of when they might have expected to and put the industry on a path to break records in 2019.”
Kessler added, “in late 2019 and early 2020 we have observed some weakening in funded status, and many sponsors will need to monitor the market closely as strong insurer and reinsurer pricing continue to provide opportunities for sponsors to de-risk.”
“These transactions with Rothesay Life prove the value of being prepared,” said Scott Gaul, who on Dec. 1 took over Prudential Retirement’s Investment and Pension Solutions businesses. “They were pursued in a thoughtful and efficient manner, driven by long-term de-risking goals set by the pension schemes, culminating in the ability to transfer risk in an incredibly busy marketplace. Looking ahead to 2020, in order for opportunistic transactions to work in our extremely busy pension risk transfer markets, the scheme, consultants, insurers and reinsurers all have to be aligned, prepared, and ready to act.”
Dave Lang, vice president and Prudential’s relationship manager for Rothesay, added the two new transactions demonstrate Rothesay Life’s ability to identify a market opportunity and assemble the right team to capitalize on it. “The longstanding partnership between Prudential and Rothesay Life dates back to our first transaction in 2011,” Lang said. “This trusting relationship helped get these two very important transactions done while market conditions held.”
“2019 was a record year for Rothesay Life, and we were delighted to have PICA alongside us to provide reinsurance on two of the largest transactions of the year,” said David Cox, head of reinsurance, Rothesay Life. “The Rothesay Life and PICA teams have been working together for nearly a decade now, and the well-established relationship and processes enabled us to close two deals in a timely and efficient manner.”