Prudential Retirement, a unit of Prudential Financial, has closed a $2.6bn in longevity reinsurance contracts and will assume nearly 16,000 pensioners in the UK.
Prudential Financial said that this early 2019 de-risking wave was driven in part by many pensions seeking to close agreements before the original 29 March Brexit deadline. But, as Brexit deadline has been extended until October, pensions that have not yet transacted have a window to move forward and de-risk.
The demand for de-risking solutions was also driven by robust funded status of UK schemes, which are claimed to have improved since 2016. Presently, the funding level of average UK pension scheme is at 100.1% as of 29 March, putting many in a better position for risk reduction.
Prudential Financial longevity reinsurance head Amy Kessler said: “Pension schemes that can afford to de-risk have raced forward in the opening months of 2019, taking advantage of the window before Brexit to reduce their risks and lock in gains. Brexit brings increasing levels of uncertainty that could wash away recent market gains and funding improvements, putting de-risking out of reach for those with lower hedge ratios. But with funding at the highest levels in a decade, pensions are de-risking at an unprecedented pace.”
Prudential Financial vice president Christian Ercole said: “Another impetus to de-risk is the notable decline in U.K. mortality rates during the last 10 months. The resulting level of market activity favors insurers and reinsurers who have invested in their pricing and analytics teams, and it also favors pension funds that come prepared with credible and complete data.”
Last month, Westchester County in New York selected Prudential Retirement as record keeper for its deferred compensation retirement plan. As part of the selection, Prudential will oversee $607m in retirement assets covering nearly 4,900 participants. The plan transitioned last December.
As per Prudential, the factors that influenced Westchester selecting the company included high quality maintained by Prudential’s participant communication materials, better investment and better record keeping platform.