Prudential, Warburg Pincus Partner on Reinsurance Firm

Prudential Financial Inc. and Warburg Pincus LLC announced Thursday the creation of a new life and annuity reinsurance company based in Bermuda.

Prismic Life Reinsurance Ltd. is a licensed Class E reinsurer, signifying total assets of more than $500 million. Prudential intends, subject to regulatory approval, to reinsure to Prismic with a block of structured settlement annuity contracts with reserves of about $10 billion, according to the announcement. Prudential, Warburg and a group of investors will also provide a combined initial equity investment of $1 billion—with Prudential taking a 20% stake and Warburg a 15% stake.

The move to start a reinsurance firm, which can allow insurance companies to spread out risk and provide more insurance-backed offerings, comes as retail sales for annuities have continued to set records on the strength of higher interest rates, combined with market volatility, according to insurance industry organization LIMRA.

“Growing consumer demand for protected outcome solutions, like those that annuities can provide, is certainly a fundamental driver for this endeavor,” Dylan Tyson, president of retirement strategies at Prudential, said via email. “We expect Prismic to enable us to provide more people with access to our industry-leading products and to meet the needs of more customers than would otherwise be possible.”

Prudential’s obligations to the holders of its annuities will remain unchanged following the reinsurance arrangement with Prismic, and Prudential will continue to administer the contracts, according to the firm. Going forward, Prudential aims for Prismic to be a reinsurance partner that will grow its reinsurance relationship “materially,” the firms announced. PGIM Inc., the asset management division of Prudential, and Warburg Pincus will provide asset management services to the new firm.

Amy Kessler, one of the founders of Prudential’s international reinsurance business and senior leader of Prudential’s pension risk transfer team, will be CEO and chairperson of Prismic.

Prismic is also being formed as pension risk transfer deals have picked up speed, rising 31% in the second quarter of 2023 as compared to last year, according to the most recent data from LIMRA.

“Potential opportunities for Prismic span across a wide array of Prudential’s products and markets,” Tyson said. “In the pension risk transfer space, there are a variety of approaches that different plan sponsors prefer. We’re constantly looking for ways to expand our capabilities that enable us to help more plan sponsors honor pension obligations. Prudential is committed to supporting plan sponsors’ de-risking objectives, and Prismic may be a helpful tool to ensure we have access to high-quality capital to meet demand in this thriving market.”

Prismic’s board will include five members: two independent directors and one director nominated by each of Prudential, Warburg Pincus and its group of investors, according to the announcement.

Nandini Mongia, president of Prudential’s open architecture solutions, will represent Prudential on Prismic’s board. Mongia most recently served as Prudential’s treasurer and played a leading role in Prismic’s creation, according to the firm.

Mike Thompson, managing director, will represent Warburg Pincus on Prismic’s board.

In July, Fidelity Investments, also registered a Bermuda-based reinsurance business to focus on pension risk transfer and retail annuities, according to regulatory filings. Soteria Reinsurance Ltd. was registered as a Class C insurer by the Bermuda Monetary Authority in June, designating it as a long-term reinsurer with total assets of less than $250 million.