Legal & General’s entry today into the European pension risk transfer market with its first deal in Holland confirms the global nature of the risk transfer market say pension consultants.
The deal sees ASR Nederland NV, a Dutch insurer, transferring £145m of pension obligations to Legal & General Re in a deal involving Hannover Re.
Hymans says the deal signals the end of the UK’s near monopoly on supply, as well as the potential for greater exporting of UK derisking expertise overseas and the possibility of new derisking options being offered to UK schemes from other countries.
Legal & General Re was set up in 2014 as a reinsurance hub to grow the international pension risk transfer business.
In October Legal & General America announced its first pension risk transfer deal with the US subsidiary of Royal Philips for approximately $450 million.
Legal & General Re CEO Manfred Maske says: “Entry into the European pensions risk transfer market represents a significant milestone for L&G Re. Put together with the recent European Union announcement of full Solvency II equivalence for Bermuda this has been a terrific couple of weeks for L&G Re.”
Legal & General Retirement managing director Kerrigan Procter says: “The pension risk transfer business has become a global business for Legal & General. The potential market for pension risk transfer in the US, UK, and Europe is huge, and will play out over many decades.
Hymans Robertson partner and head of risk transfer James Mullins says: “This is confirmation of the now global market for risk transfer. UK pension schemes have enjoyed a near monopoly on supply for the past 5 years, but that is set to change. With more choice of markets, reinsurers who are taking on longevity risk may look to increase pricing over the longer term, but that goes against the trend we have seen for some time now of reinsurers keeping prices low – strong competition, intense interest in the sector and appetite for deals has kept it that way.
“The fact is, the UK has and likely will continue to be the pioneer marketplace for this industry. The expertise developed here is now being exported overseas, but it wouldn’t be surprising to see innovation coming back this way in the medium term, offering new routes to de-risking for UK pension schemes.”
Barnett Waddingham senior bulk annuity consultant Mark Paxton says: “TLegal & General’s overseas expansion demonstrates a new direction for the UK bulk annuity market. Some significant transactions have been completed in the UK in the last two years, and it is not surprising if UK insurers look to use their experience and reputation to win overseas deals.”