Hartford-based Prudential Retirement said Tuesday that it will provide reinsurance of longevity risk to Rothesay Life, a subsidiary of The Goldman Sachs Group Inc., for a pension fund involving a British food manufacturer. The transaction covers 423 million British pounds of pension liability, or about $665 million.
Prudential's deal with United Kingdom-based Rothesay Life secures retirement benefits, including life annuities, for 20,000 people covered in Uniq Plc Pension Scheme. Uniq Plc is a British manufacturer of chilled and prepared foods, including desserts, wraps, sandwiches, soups and sauces. Uniq announced in December that its pension plan would be insured by Rothesay Life. More than half of people in the plan have not reached retirement age.
Prudential offers longevity reinsurance coverage in case people in a pension plan live longer than anticipated by their pension trustee or the insurance company that provides annuities to guarantee funding that pension, said Amy Kessler, head of the Longevity Reinsurance business and senior vice president at Prudential Retirement.
"If they live a year longer, if they two years longer, if they live five years longer, we pay that incremental benefit," Kessler said.
The average time between retirement and death has increased in recent decades; between 1970 and 2008, the average rose from 13 years to 17.5 years, Kessler said. But the market for longevity reinsurance is still largely in Europe despite $2 trillion in private pension funds within the U.S., Kessler said.
In the past decade, market volatility and regulatory reforms have made it difficult for employers, or pension sponsors, to secure benefits for retirees.
Efforts to manage risk led to a new business opportunity last year for Prudential Retirement, which is a subsidiary of Newark, N.J.,-based Prudential Financial Inc.
Global demand to transfer risk of pension plans will increase as plan sponsors look for ways to manage exposure to risk, Kessler said.
Prudential Retirement's largest longevity reinsurance transaction so far was announced in November, also with Rothesay Life and a sister company, Paternoster, which are both part of Goldman Sachs, for a different pension fund. That transaction at the time was valued at 450 million British pounds, or $723 million.
"We are happy to partner with Rothesay on another innovative Pension Risk Transfer transaction that helps to secure the retirement benefits of Uniq's members," Kessler said.
All of the policies are written in Hartford.
Prudential Retirement has 3.6 million people in its retirement plans and annuities, with a total of $229.5 billion in retirement accounts as of Dec. 31.