Pacific Life Re Takes $3 Billion of American National's Pension Longevity Before RBC Can Charge for It

Pacific Life Re took on the longevity risk behind $3 billion of American National's pension risk transfer liabilities on October 6, the first US deal for the Savings & Retirement business it already runs in the UK, the Netherlands and Canada (Reinsurance News, October 6, 2026). For 2026, the Life RBC instructions the NAIC adopted in May tell every US insurer that assumes longevity reinsurance to enter a capital requirement of zero.

Neither announcement gives pricing, block detail or collateral terms; Eversheds Sutherland advised the reinsurer (Artemis, October 7, 2026). What it moves is narrow: the annuitants' survival risk, with no transfer of the assets behind them described. That is the UK template, landing in a US market whose annuity reinsurance growth has come through asset-intensive cessions offshore. US capital rules charge a PRT writer for longevity it keeps, have no line for longevity it cedes, and have no number yet for longevity a reinsurer assumes.

Key Takeaways

$3 billion of PRT liabilities had their longevity risk ceded by American National to Pacific Life Re, the reinsurer's first US transaction for its Savings & Retirement unit, with no pricing, block or collateral terms disclosed.
Zero is the 2026 RBC requirement on assumed longevity reinsurance under NAIC proposal 2026-07-L, adopted by the Capital Adequacy (E) Task Force on May 14, 2026, after the 2021 longevity charge left these contracts out entirely.
0.89% pre-tax is the LR025-A factor on in-scope annuity reserves above $1 billion, which puts about $26.7 million of longevity C-2 on $3 billion of PRT reserves before the formula's tax, correlation and covariance steps.
2% of next year's benefits is the VM-22 reserve floor that binds a longevity reinsurer in the Academy's July 28 illustration: about $1.9 million on a $1.07 billion block paying $96.0 million a year.
95% of defined benefit sponsors with de-risking goals now intend to fully divest their pension liabilities, up from 76% in 2019, as Milliman's 100 largest plans reached 114.5% funded at September 30.

What the Treaty Transfers and What Stays With American National

Longevity reinsurance, as the American Academy of Actuaries described it to NAIC regulators on July 28, has two legs. The reinsurer pays a floating leg: the benefits tied to the actual survival of the covered annuitants. The cedent pays a fixed leg of premiums and fees set at inception that do not move with mortality. In the Academy's illustrative deal the premium equals best-estimate claims and the fee is 3.5% of it, worth $35.2 million in present value on a $1.00 billion block of younger lives (American Academy of Actuaries, July 2026). Bonds, investment risk and the annuitant relationship stay with the cedent.

That makes the deal's size easy to misread. $3 billion is the value of the covered liabilities, not a premium paid. It is roughly the entire US buy-out market's first quarter: $3.02 billion across 85 contracts, down 57% from a year earlier as deal flow bunched into late 2025 (LIMRA, July 2026). Against the $314.6 billion of buy-out assets in force at that point, it is about 1%.

More of that risk is coming. MetLife's 2026 poll of 250 sponsors with de-risking goals found 95% intend to fully divest their pension liabilities, up from 76% in 2019, with a quarter expecting to do so within two years (MetLife, October 7, 2026). Milliman's Pension Funding Index closed September at 114.5%, after the discount rate rose 47 basis points in the month to 6.47%, the highest since May 2009 (Milliman, October 7, 2026). Every buyout those sponsors place lands that longevity on an insurer's balance sheet.

How LR025-A Charges a Longevity Treaty on Each Side

Life RBC carries the longevity C-2 charge on page LR025-A. For directly written life-contingent annuities, including group annuities backing pension liabilities, it applies tiered pre-tax factors to statutory reserves, calibrated so surplus covers longevity claims to the 95th percentile with reserves assumed to cover the 85th (NAIC proposal 2026-07-L, May 2026). Factors fall with size because level and volatility risk diversify across lives; trend risk does not.

LR025-A line	Exposure	Pre-tax factor	Requirement
Line (5)	First $250 million of reserves	1.71%	$4.28 million
Line (5)	Next $250 million	1.08%	$2.70 million
Line (5)	Next $500 million	0.95%	$4.75 million
Line (5)	Reserves over $1 billion	0.89%	$8.9 million per $1 billion
Line (6)	Assumed longevity reinsurance, 2026	Zero by instruction	$0

American National's in-scope reserves exceed $1 billion on the ceded block alone, so its marginal factor is 0.89%. On $3 billion of PRT reserves that is $26.7 million pre-tax, about $21.1 million after the 21% tax adjustment, before the -0.25 correlation with life C-2 and the covariance step. The page measures that charge on the cedent's own reserves. ACLI told the Longevity Risk (E/A) Subgroup in February that the proposals "do not address whether, or how, longevity reinsurance is recognized as risk transfer" for cedents, and asked that relief follow mortality C-2 (NAIC comment packet, February 2026).

The assuming side is the empty line. When the longevity charge was adopted in 2021, the Life RBC (E) Working Group left longevity reinsurance out (Academy letter, February 2, 2026). Proposal 2026-07-L built the line this spring, adopted by the subgroup April 9, the working group April 23 and the task force May 14, and instructs filers to enter zero for 2026.

Reserves are thin too. In the Academy's illustration the reinsurer holds the VM-22 floor of 2% of the next 12 months' benefits: about $1.9 million on an older block paying $96.0 million a year, against $9.5 million of pre-tax C-2 the same $1.07 billion would draw at 0.89% held directly.

On the 2026 formula, then, the treaty puts no required capital on the assuming side, and whether it relieves American National turns on reserve credit the instructions do not address. Its economics rest outside the US formula, on a reinsurer's diversification across UK, Dutch, Canadian and now US lives. Pacific Life's appointed actuary, Kory Olsen, told the subgroup that guaranteed premiums and fees to the assuming entity "provide a meaningful offset" to long-term variability (Pacific Life, February 2, 2026).

The 2027 Shock Calibration and the Pre-2020 Cushion

The factor that replaces the zero is unfinished, and the Academy's July deck lists what is left. The mortality improvement shock heads its next steps, for structure and size, followed by base-mortality misestimation and the calibration of shocks for liabilities originated outside the US. Today's annuity charge rests on improvement-rate shocks of 116% below age 85 and 140% above, and a base-mortality shock to 94.2% of expected at the first $250 million tier but 99.3% at the over-$1 billion tier where most writers sit.

A charge measured on the net of the two legs rewards seasoning. The Academy found that companies with material business written before COVID "could have zero C-2," because their floating-leg payments would run below what was assumed at pricing. A reinsurer's older books could screen to nothing while a block priced in October 2026, on post-pandemic mortality and a full fee, carries the whole charge. The same deck finds the improvement shock bites hardest on younger lives, which is where PRT blocks carrying deferred members sit.

Ceded credit moves at the same moment. If credit follows the risk, as ACLI proposed, up to the $26.7 million that 0.89% puts on the ceded reserves would migrate to the balance sheet that assumed it, at a factor still to be calibrated, after both parties priced the fee. The treaty was signed in the one year when that factor is fixed at zero by instruction.

Pacific Life Re Takes $3 Billion of American National's Pension Longevity Before RBC Can Charge for It

Key Takeaways

What the Treaty Transfers and What Stays With American National

How LR025-A Charges a Longevity Treaty on Each Side

The 2027 Shock Calibration and the Pre-2020 Cushion

Further Reading

Sources