Pension Corp feeling the pain?

Does Pension Corp have an actuarial problem? Have their longevity assumptions been too aggressive?

By Sarah Mortimer 

Dec 17 (Reuters) - Munich Re has won a 400 million pound ($645 million) deal from British pensions insurer Pension Insurance Corporation (PIC) to help it cover risks associated with people living longer than expected. 

PIC is paying Munich Re, the world's biggest reinsurer, to take on liabilities from pension fund business PIC has insured that is affected by so-called increased life duration. 

Pension funds are struggling to cope with extra costs from people living longer in retirement and are also finding it tough to generate adequate returns due to market volatility since the financial crisis. 

As a result, insurers and reinsurers are capitalising on increased demand from pension funds for ways to manage their liabilities. 

PIC, which insures pension fund liabilities, has done a total of 1 billion pounds this year of so-called longevity insurance deals including the Munich Re contract. It has done 4 billion pounds worth over the past four years. 

Swiss Re last week won a similar deal worth 800 million pounds with the pension fund of British insurer LV to help it absorb the cost of members living longer than expected.

($1= 0.6198 pound) (Editing by Jane Merriman) ((sarah.mortimer@thomsonreuters.com)(+44 20 7542 9619)(Reuters Messaging:sarah.mortimer.thomsonreuters.com@reuters.net))