Growth in the pension reinsurance market
Pension risk transfer, where companies pass the obligations of defined-benefit plans to insurers, has been growing strongly in several markets. Insurers taking on these liabilities often use reinsurance to manage longevity risk and capital requirements.
Longevity reinsurance protects against the risk that pensioners live longer than expected, while asset-intensive deals can transfer both investment and longevity risk. Demand is driven by employers seeking to de-risk their balance sheets and by improved funding levels of many plans.
The growth of the market has attracted new reinsurers and capital, which increases capacity but also requires careful underwriting of long-term demographic and investment assumptions.