Prudential and PIC in Longevity Reinsurance Deal

The de-risking giants have sealed a major pan-Atlantic longevity transaction.

Pension Insurance Corporation (PIC) has agreed a deal with the Prudential Insurance Company of America to reinsure £1.6 billion ($2.5 billion) of pension fund liabilities against increases in members’ longevity.

The agreement covers members of 74 pensions that have transferred to PIC through buy-outs and buy-ins in recent years, the UK-based insurer said in a statement this morning.

Khurram Khan, head of longevity risk management at PIC, called the transaction “an unprecedented deal… in terms of both the nature and size of the project”.

PIC’s most recent pension-risk transfer deals include a £1.6 billion buy-in transaction with oil giant Total’s UK pension, completed last summer. In 2013 it backed a £1.5 billion buy-out of music label EMI’s UK pension.

Prudential is the dominant pension insurer in the US, having taken on billions in assets and liabilities in the past few years. Most notably, it has backed some of the biggest de-risking deals in history, including GM’s $26 billion transaction in 2012, the $7.5 billion deal with Verizon in 2013 and last year’s $3 billion transfer of liabilities from Motorola’s pension.

Earlier this year it took on 5,000 pensioners and $600 million of liabilities from vehicle components manufacturer Timken, and split a $2.5 billion pension-risk transfer deal for Kimberley-Clark’s US pension with MassMutual.

Prudential has acted as reinsurer for UK groups Rothesay Life and Legal & General in the past 12 months.

Related: How Longevity Will Scupper Your Investment Strategy & Pension Corporation Taps Friends Life for New CIO