Prudential develops innovative process with PIC to help small pensions de-risk
March 27 2018 - 11:23AM
Business Wire
A collaborative effort between Prudential Retirement, a unit of
Prudential Financial, Inc. (NYSE:PRU), and Pension Insurance
Corporation (PIC) has created an innovative new approach for
expediting longevity reinsurance transactions for smaller pension
buy-ins and buy-outs. This new approach combines an advance
commitment of capital, known pricing and the bundling of multiple
transactions into a single closing to enable PIC to more nimbly and
efficiently address the risk transfer needs of small pensions and
their retirees.
Launched, tested and proven effective by Prudential and PIC
throughout 2017, this flow reinsurance structure has shown itself
to be an effective tool for increasing the primary insurer’s
capital efficiency and reducing the administrative burden for both
the primary insurer and the reinsurer. With new models and
predictive analytics, this systematic approach helps streamline the
reinsurance transaction process for PIC’s smaller pension buy-in
and buy-out transactions that meet pre-agreed criteria. These
blocks will be reinsured by Prudential at the model-determined
price.
“This approach is a win for PIC, a win for Prudential, and a win
for the market,” said Amy Kessler, Prudential’s head of longevity
reinsurance. “It is a win for the market because it supports the
continued growth of the small-transaction segment very effectively.
It is a win for PIC because it has reinsurance capital lined up at
a known price to support its fantastic work with smaller schemes.
Finally, it is a win for Prudential because it helps us to
efficiently reinsure a diverse and important segment of the U.K.
market.”
Historically, the longevity reinsurance market for smaller
pension buy-ins and buy-outs has been difficult to serve because of
the complexity and administrative burden of pricing and executing
contracts for each small transaction. Prudential and PIC, having
worked together for years on multiple risk transfer transactions,
started collaborating on this project almost two years ago as part
of a joint effort to find better, more efficient ways to serve
these smaller pension schemes.
The approach developed by Prudential and PIC creates economies
of scale, execution efficiency and greater flexibility, enabling
both companies to better meet the needs of this rapidly growing
market.
Khurram Khan of Pension Insurance Corporation said: “This
evolution in longevity risk hedging brings with it greater
automation and certainty to the reinsurance of U.K. bulk annuities.
PIC continues to develop other such products in conjunction with
enterprising reinsurers such as Prudential.”
Bill McCloskey, Prudential’s head of transactions for
international longevity reinsurance, said: “This new process
leverages Prudential’s and PIC’s innovative cultures and execution
capabilities. We have enjoyed collaborating with PIC to help find
better ways to address their needs in managing pension-related
longevity risk.”
About Pension Insurance Corporation
The purpose of Pension Insurance Corporation plc (“PIC”) is to
pay the pensions of its policyholders. At year-end 2017, PIC had
insured 151,600 pension scheme members and had £25.7 billion in
financial investments, accumulated through the provision of
tailored pension insurance buy-outs and buy-ins to the trustees and
sponsors of U.K. defined benefit pension schemes. Clients include
FTSE 100 companies, multinationals and the public sector. PIC is
authorized by the Prudential Regulation Authority and regulated by
the Financial Conduct Authority and Prudential Regulation Authority
(FRN 454345). For further information please visit
www.pensioncorporation.com.
About Prudential Financial, Inc.
Prudential Financial, Inc. (NYSE: PRU), a financial services
leader with more than $1 trillion in assets under management as of
December 31, 2017, has operations in the United States, Asia,
Europe, and Latin America. Prudential’s diverse and talented
employees are committed to helping individual and institutional
customers grow and protect their wealth through a variety of
products and services, including life insurance, annuities,
retirement-related services, mutual funds and investment
management. For more information, please visit
news.prudential.com.
Prudential Retirement delivers retirement plan solutions for
public, private, and nonprofit organizations. Services include
defined contribution, defined benefit and non-qualified deferred
compensation recordkeeping, administrative services, investment
management, comprehensive employee education and communications,
and trustee services, as well as a variety of products and
strategies, including institutional investment and income products,
pension risk transfer solutions and structured settlement services.
With more than 85 years of retirement experience, Prudential
Retirement helps meet the needs of 4.3 million participants and
annuitants. Prudential Retirement has $429.1 billion in retirement
account values as of Dec. 31, 2017. Retirement products and
services are provided by The Prudential Insurance Company of
America (PICA), Newark, N.J., or its affiliates.
Reinsurance contracts are issued by either Prudential Retirement
Insurance and Annuity Company (PRIAC), Hartford, Conn., or PICA.
Both are wholly owned subsidiaries of Prudential Financial, Inc.,
and each company is solely responsible for its financial condition
and contractual obligations. Neither PRIAC nor PICA is licensed or
regulated by the U.K. Prudential Regulation Authority as an insurer
or regulated by the Financial Conduct Authority, nor does either
conduct business in the United Kingdom or provide direct insurance
to any individual or entity therein. Prudential Financial, Inc. of
the United States is not affiliated with Prudential plc, a company
headquartered in the United Kingdom.
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version on businesswire.com: https://www.businesswire.com/news/home/20180327005984/en/
For Pension Insurance Corporation:Jeremy Apfel, +44 20
7105 2140apfel@pensioncorporation.comorFor Prudential
Financial:Gregory Roth, 973-802-6585Mobile:
973-477-0570gregory.roth@prudential.com
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