Prudential is addressing pension challenges in its new longevity reinsurance deal with Legal & General.

It is the second longevity reinsurance transaction Prudential Retirement Insurance and Annuity Company has completed with Legal & General.

The latest transaction will cover USD 2.9bn of pension liabilities for retirees insured by Legal & General's pension bulk annuity business.

It follows the recent completion of another longevity reinsurance transaction with Pension Insurance Corporation.

Bill McCloskey, vice president longevity reinsurance at Prudential, said: "We're pleased that Legal & General has offered us an opportunity to partner with them again to help solve pension challenges."

"The impact of longevity on pension plans is a global issue that affects employees and employers across the US and the UK and this latest transaction demonstrates the capacity we have as a reinsurer to support the pace of the market in the UK, which remains very active."

Partner at independent pensions consultancy Hymans Robertson, Douglas Anderson, said the longevity deal was further evidence of a global trading market with longevity as a commodity.

He said: "The L&G to Prudential deal follows in the footsteps of a similar transatlantic trade from Aegon to Canada Life Re."

"In the run up to Solvency II going live in January 2016, we're likely to see more international trades as the EU's new rules for reserving for longevity require higher risk capital.

"This is encouraging UK bulk annuity writers to reinsure the longevity element of new deals outside the EU, rather than retain it on their balance sheet - it's also prompting them to explore whether index-based longevity derivatives can reduce the risk margin," he said.

Anderson went on to say that although at the early stages, a global commoditised longevity risk trading market is increasingly likely – with "striking similarities" to the evolution of the credit markets.

First published 27.08.2015

Lindsay.sharman@wilmingtonplc.com