The move will establish a new reinsurance partnership between the two, which will see The Prudential Insurance Company of America (PICA) assume the longevity risk for approximately ÂŁ1 billion (nearly US$1.4 billion) in pension liabilities.
In a statement, the firms said the agreement comes amid â€śsurging demand for de-risking from the UK, where pension insurers are increasingly seeking to manage their risk and capital with longevity reinsurance arrangements.â€ť
Demand is also being driven by the increasing affordability of pension risk transfer, reflecting attractive pricing and the enhanced capacity of insurers, as well as the improved finances of UK schemes, many of which are approaching full funding, the statement said.
Prudentialâ€™s head of longevity risk transfer, Amy Kessler, said market activity in 2018 is building toward a very strong second half.
â€śRising rates and equities, combined with lower-than-expected longevity improvements, mean that pension schemes are very well-funded and that de-risking is more affordable than ever,â€ť Kessler said. â€śLeading pension schemes are taking advantage of this favourable environment by locking in gains and transferring risk, knowing that such advantageous markets are always fleeting.â€ť