Home ListingDecember 16, 2015

L&G Dives Into Dutch De-Risking

The €200 million transaction is hailed as a “significant milestone” as the Netherlands' market begins to open up.

Reported by Featured Author

UK insurer Legal & General (L&G) has entered the European pension-risk transfer market for the first time, executing a €200 million ($218 million) transaction with a Dutch insurer.

L&G Re, the firm’s reinsurance subsidiary, has taken on the liabilities from ASR Nederland. L&G established the reinsurer last year to build the group’s international de-risking business, and the Dutch transaction was its first deal.

L&G has been openly targeting the Netherlands since 2013, but the ASR Nederland deal is the first it has struck directly—although L&G America earlier this year took on roughly $450 million of US pension liabilities from Dutch company Philips.

It is also the group’s first venture into European de-risking, a move that L&G Re CEO Manfred Maske called “a significant milestone”.

The Netherlands’ pension-risk transfer market is far smaller and less mature than in the UK and US. In August 2014, Aegon completed a buyout of two mineworkers’ pension funds worth roughly €800 million. This remains the country’s largest transaction by a significant margin.

Kerrigan Procter, managing director at Legal & General Retirement, said the ASR Nederland transaction meant pension-risk transfer “has become a global business”.

“The potential market for pension-risk transfer in the US, UK, and Europe is huge, and will play out over many decades,” he said.

L&G has been involved in deals on both sides of the Atlantic, including the ground-breaking £2.5 billion ($3.8 billion) de-risking of the TRW Pension Scheme, which covered retirees in the UK, US, and Canada.

The group also insured a £129 million international pension fund for Unilever’s overseas workers in October last year.

James Mullins, head of risk transfer at Hymans Robertson, said the ASR Nederland transaction was “confirmation of the now global market for risk transfer”.

“UK pension schemes have enjoyed a near monopoly on supply for the past 5 years, but that is set to change,” Mullins said. “With more choice of markets, reinsurers who are taking on longevity risk may look to increase pricing over the longer term, but that goes against the trend we have seen for some time now of reinsurers keeping prices low—strong competition, intense interest in the sector, and appetite for deals has kept it that way.”