The longevity risk reinsurance agreement with Canada Life Reinsurance is expected to help Aegon reduce its required capital, while improving its capital position
Canada Life Reinsurance has signed a €12bn longevity risk reinsurance agreement with Dutch life insurance company Aegon to reinsure a quarter of the latter’s longevity exposure in the Netherlands.
As part of the agreement, Canada Life Reinsurance will reinsure nearly 200,000 of in-payment and deferred pensioners. The arrangement is expected to help the Dutch life insurance company reduce its required capital, while improving its capital position.
The contract will begin on 31 December 2019 and will be in place till the portfolio runs off. Aegon said that the longevity risk reinsurance agreement will not affect the services and guarantees provided to its policyholders.
Aegon CEO comments on the longevity risk reinsurance agreement
Aegon CEO Alex Wynaendts said: “This longevity reinsurance agreement is in line with our strategy to release capital from mature, spread-based businesses.
“Through this transaction we are freeing-up significant capital from our Dutch life insurance activities. This underscores our commitment to maintain a strong capital position in the interest of all our stakeholders.”
According to the Dutch life insurance company, the benefit to its Solvency II ratio in the Netherlands, following the transaction, is expected to be on par with prior guidance of 10-12%-points. Aegon said that this corresponds to an increase by 5-6%-points in its Solvency II ratio with underlying earnings before tax to be reduced by nearly €25m per year.
Canada Life Reinsurance chief operating officer Derek Popkes said: “We are delighted to grow and diversify our global longevity portfolio by working with Aegon to deliver a transformational longevity transaction tailored to their specific requirements.
“We will continue to innovate and work in partnership with our valued clients to deliver the best risk transfer solutions matching their objectives.”
The Canadian company, which is a division of The Canada Life Assurance, provides risk and capital management solutions to insurers, reinsurers and pension funds, covering mortality, longevity, health and lapse risks. It has operations across the US and Europe.
Earlier this year, Canada Life Reinsurance signed a €5.5bn longevity risk reinsurance agreement with SRLEV N.V. (VIVAT). Over 150,000 of in-payment and deferred pensioners are reinsured by the Canadian firm under the agreement.