NN Group taps Prudential & Swiss Re for €13bn longevity risk transfer
NN Group has announced the successful transfer of €13 billion in longevity risk associated with pension liabilities in the Netherlands to an insurance subsidiary of Prudential Financial, Inc. and global reinsurance specialist Swiss Re.
NN Group explained that the pair of longevity risk transfer deals will reduce the firm’s life business exposure to longevity risk, further strengthening its capital position as a result.
The pair of longevity risk transfer transactions, which seem to feature elements of longevity swaps and reinsurance arrangements, cover the longevity risk of approximately 300,000 Netherlands pension policies and will become effective as of December 31st 2023.
The longevity reinsurance agreements will continue until the portfolio has run off, NN said, while they will not have any impact on the services and guarantees that NN provides to its policyholders.
“The capital uplift and economics from these transactions are very attractive compared to the limited impact on operating capital generation. It underscores our efforts to continually look for value creating opportunities, reduce longevity risk in the Dutch market, and actively manage our balance sheet,” explained David Knibbe, CEO of NN Group.
The overall block of longevity risk appears to have been split roughly two-thirds to Prudential Financial, one-third to Swiss Re.
Prudential Financial said that its subsidiary entered into a longevity risk transfer agreement with NN Life valued at US $9.2 billion, reinsuring a block of more than 200,000 policies with The Prudential Insurance Company of America.
Prudential said it is the company’s first international longevity reinsurance transaction in the Dutch market, aligning to its growth strategy.
“Prudential is proud to support NN Life through this transaction, and we are excited to expand the presence of our Institutional Retirement Strategies business into The Netherlands,” Charles Lowrey, chairman and CEO, Prudential Financial, Inc said. “This longevity risk transfer further demonstrates our vision to be a global leader in expanding access to investing, insurance, and retirement security.”
Alexandra Hyten, head of Institutional Retirement Strategies, Prudential, added, “With the recently passed Dutch pension reform legislation, we anticipate the market for risk transfer to continue to grow. We are well-positioned to assist insurers and plan trustees in meeting their de-risking objectives by offering customized reinsurance solutions.”
That leaves just over US $5 billion of longevity risk to have been backed by reinsurance from Swiss Re, the remainder of the €13 billion of risk transferred through these longevity swap and reinsurance deals.
NN Group explained the benefit of the longevity risk transfer arrangements to the company, with an upfront capital benefit expected to increase the NN Group Solvency II ratio by approximately 8%-points, and NN Life’s Solvency II ratio by approximately 17%-points, based on the balance sheet and markets at the end of September 2023.
View details of many longevity swaps and longevity reinsurance deals in our longevity risk transfer deal directory.
