Longevity Risk Market Comes Of Age

Longevity risk, the chance that people will live longer than expected, is now increasingly at the forefront of employers' minds. As a result, there is now a growing awareness of the importance of mitigating such risks, which has led to a new market with innovative market-based risk transfer solutions to emerge.

In July 2014 the British Telecom Pension Scheme (BTPS) entered into a seminal £16 billion transaction to transfer a quarter of its longevity risk to Prudential. In order to transfer the risk to Prudential Insurance Company of America, BT established its own 'captive' insurer (a Guernsey-based incorporated cell company - ICC), allowing it to access the reinsurance market directly without paying a bank or insurer to act as an intermediary.