Longevity Reinsurance Deal Support

Objective

The North American life operation of a global reinsurer was preparing its first longevity reinsurance bid. It had pricing and structuring expertise in-house but wanted an actuary experienced in negotiating longevity treaties on behalf of a reinsurer. The role was to review the quotes, letter of intent and, if the bid succeeded, the treaty.

The first deadline was less than two weeks away, and the expected work involved a small number of hours. The client needed advice on contract terms rather than a separate calculation project.

The search focused on actuaries with direct experience writing longevity reinsurance treaties.

Scope of Work

The engagement was documented as a statement of work under the master agreement already in place between the reinsurer and Graeme Group. Two areas of support were defined:

• Qualitative review of, and written recommendations on, the terms and conditions attached to the non-binding quote, binding quote, letter of intent and treaty, with a supporting discussion where the reinsurer required one.
• General support, as requested, on the reinsurer’s response to the longevity reinsurance request for proposal.

No personally identifiable data was in scope. Materials were exchanged directly with the advisor through Graeme Group systems and deleted at the conclusion of the work.

Services Provided

Matching on Transaction Experience

We proposed a US-based Fellow of the Society of Actuaries with more than three decades of life reinsurance and retrocession experience, including leadership of a global reinsurer's retrocession business. He had written longevity treaties and worked on their actuarial, legal and counterparty risk terms. He came through a referral from a former chief risk officer of a major Canadian insurer. We proposed him on the day the request arrived, and the reinsurer confirmed its interest that afternoon.

Contracting Under the Existing Agreement

An existing master services agreement allowed the new work to be documented promptly. The statement of work used the reinsurer's deliverables and acceptance criteria and was signed within a week. The advisor began reviewing the quote terms before the deadline.

Staying Available as the Deal Progressed

After the bid succeeded in early July, the reinsurer asked the advisor to remain available for treaty review. He reviewed the draft in September, answered questions and remained available until the treaty was signed.

A Second Engagement with the Same Client

The reinsurer had previously engaged a Canadian FCIA through Graeme Group for a group insurance project. That earlier placement established the relationship and master agreement used for the longevity work.

Deliverables

Graeme Group arranged advisory support for the reinsurer's transaction documents, including:

• Written reviews of, and recommendations on, the terms and conditions at each stage of the transaction: quotes, letter of intent and treaty.
• Support on the request for proposal as the reinsurer required it.
• A statement of work under the existing master agreement, using the reinsurer's deliverables and acceptance criteria.
• Continued availability of the advisor through the treaty drafting and execution period.

Outcome

• Bid Won: The reinsurer was successful in the tender, its first longevity reinsurance transaction in that market.
• Treaty Executed: The treaty was signed within four months of the award. The reinsurer's deal team thanked the advisor for his support.
• Advice as Needed: A small number of hours was spread across five months, with the advisor available at each stage of the transaction.
• Further Work Expected: The reinsurer received additional longevity tenders and indicated that it expected to need further reviews.
• Repeat Engagement: This was the second placement in two years under the existing master agreement, following the earlier group insurance assignment.