US/GERMANY - Prudential is preparing to launch the first longevity insurance product in the US "very soon", delegates at the Longevity 7 conference in Frankfurt were told.
Prudential (known as Pramerica in the UK), which earlier this year completed the country's first buy-in deal with Hickory Springs (Global Pensions; 26 May 2011), said it was working on bringing the product to market to afford US pension plans the same ability to deal with longevity risk as their UK counterparts.
However, Amy Kessler, senior vice president and head of longevity reinsurance at Prudential Retirement, told delegates at the conference in she did not expect a high take-up from pension plan sponsors because longevity risk awareness is so low in the US.
Kessler said: "I believe longevity insurance will be available in the US very soon. Today we offer it as a reinsurance product because there is so much demand coming from the UK and we reinsure that pension risk. However, in the very near future we intend to bring this to US sponsors as well in the form of longevity insurance because we believe they should have the same kind of choices and flexibilty in de-risking as exist in the UK."
Kessler told delegates that the US was unaware of the full extent of longevity risk as they were too preocupied with asset risk.
"For US plan sponsors, risk taking is still the norm," she said. "The average US pension plan is underfunded and still invested in 50-60% risk assets and 40% bonds.
"One of the things very clear about the UK market is plan sponsors have sought to reduce their asset risk first. Once that risk is reduced to the point where it has 70-80% of its assets in fixed income, at that moment longevity risk becomes quite a significant piece of the remaining risk.
"Instead, many US sponsors and probably thinking that in comparison to their very significant asset risk, longevity is not meaningful, but that would change if their asset risk was reduced."
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