Three recent sizeable insurer-to-reinsurer longevity-risk transfer (LRT) transactions in the Netherlands have highlighted the growing use of the de-risking tool by insurers as the Dutch pension risk transfer (PRT) market undergoes a profound transition.
In February, Pacific Life Re completed a €1.3bn longevity swap deal with Aegon Levensverzekering that covered a portion of pensions included in a un-named defined benefit (DB) scheme’s buy-out. A month later, Achmea and Achmea Pension & Life signed off on two longevity hedges totalling €8bn with Munich Re and Pacific Life Re.
They are the latest in a slew of Dutch LRT transactions that have accelerated in the past few years. Since 2019, about a dozen deals have been struck with a combined value of €78bn, compared with six worth around €46bn in total between 2012 and 2017.
“While not all Dutch longevity transactions are publicly disclosed, these figures provide a strong indication of the overall scale and sustained growth of the market,” said André de Vries, Vice President, Business Development, EMEA at Reinsurance Group of America.
The growth of PRT – and its consequent boost to LRT transactions – in the Netherlands has been spurred by a number of factors.
PRTs in the Netherlands have been steadily increasing since the government passed the Futures of Pensions Act – or Wet Toekomst Pensioenen (WTP) – in 2023, mandating DB schemes to move the burden of risk from sponsors and into defined contribution (DC) and other market-dependent structures by January 1, 2028.
Such switches are costly in terms of administration and meeting regulatory obligations. That has convinced many trustees to side-step the process and offload their schemes to insurers through bulk purchase annuity (BPA) deals. As well, forecast performance and volatility in the capital markets in which DC schemes invest has led administrators to opt for the safety of guaranteed member payouts offered by annuitised policies.
As a result, the volume of Dutch pension longevity risk on the books of insurers has swollen.
According to reports, the accumulated value of buy-outs is estimated at between €20bn and €30bn. In an article published by the Dutch prudential supervisor DNB, €7bn of pension buy-outs were executed in the Netherlands between Q2 2023 and Q3 2025, bringing the aggregate value of insurers’ pension schemes to €230bn, or 15% of total pension provisions in the nation.
That has offered rich pickings to reinsurers who have increased their presence in the Dutch market. However, breaking into this sector requires scale.
“If you’re a reinsurer wanting to write this risk, it involves quite an investment in time and therefore cost to figure out how you underwrite it, you want a big enough pipeline to make it worthwhile,” said Martin Bird, Senior Partner at Aon in the UK.
LRT transactions are attractive to insurers, too, because they are capital efficient. Under Solvency II (SII), insurers must maintain a level of capital buffers against the risks they hold. The more risk they can offload in LRT deals, the more capital it frees for them to transact more business.
“Basically, it just shrinks your capital obligation. And if you’ve got to write new buy-out business, you’ve got to have capital available,” Bird said.
“Insurers are generally freeing up capital and they’re doing it because they’re looking at what’s going on in the pensions market and seeing a growing impetus or demand for PRT solutions. They’re freeing up capital in anticipation of that business, which they expect to come down the track over the next few years.”
The outlook for LRT deals is strong as the PRT market that has fuelled its growth in recent years expands.
For a start, LRT pricing has become more attractive as more deals have been struck, creating a virtuous circle that has enabled insurers to offer better pricing for PRT transactions. That, in turn, has increased the likelihood of more schemes moving to buy-out.
Further, reinsurers’ experience in the much larger UK PRT and LRT markets has also given them the expertise to broaden their coverage. Until recently, LRT deals were confined to in-payment scheme members. Now, reinsurers are able to price for deferred members.
“The reinsurance market has got a lot more comfortable with this,” said Bird.
“The market has figured out how to do all of that and therefore is pricing it much more efficiently.”
While the Dutch LRT market is expected to continue flourishing as PRT transactions accelerate up to the WTP cut-off date, deals are likely to continue beyond that.
WTP allows for DB schemes to continue in their present format so long as they don’t take on new members. This gives them more time to consider their end-game options, but it also means their assets and liabilities can only get smaller as members die.
“At some stage, these funds need to decide on their long-term future – before they become too small to continue independently,” said de Vries.
“As a result, we expect pension buy-outs in the Netherlands to continue beyond the WTP cut-off date.”
Bird is also confident that the Dutch LRT market will offer an attractive diversification opportunity for global reinsurers that have capitalised on market growth overseas.
“The global reinsurance market is super keen on Dutch risk – they want to write longevity risk,” he said.
“They have plenty of UK risk already on the balance sheet. They do want more UK risk, but the Dutch risk is good because it’s different to the UKs. It’s a diversifier.”
