This early 2019 de-risking wave has been driven in part by many pensions seeking to close agreements prior to the original March 29 Brexit deadline. But with the Brexit deadline extended until late October, pensions that have not yet transacted have an unexpected window to move forward and de-risk.
Demand for de-risking solutions has also been driven by the robust funded status of U.K. schemes, which have improved markedly since 2016. The funding level of the average U.K. pension scheme stood at 100.1% on March 29, putting many in a favorable position to reduce risks.
“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,” said Amy Kessler, head of longevity reinsurance at Prudential Financial. “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.”
“Another impetus to de-risk is the notable decline in U.K. mortality rates during the last 10 months,” said Christian Ercole, vice president at Prudential Financial. “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.”
Prudential is a global leader in the pension reinsurance market with more than $60 billion in international reinsurance transactions since 2011, including the largest longevity risk transfer transaction on record, a $27.7 billion transaction involving the BT Pension Scheme.
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