Munich Re Assumes Manulife’s Standalone LTC Block
Munich Re has assumed the full biometric risk of a CA$3.2 billion block of long-term care (LTC) policies from Manulife Financial Corporation, marked as the insurer’s first standalone LTC reinsurance transaction. The deal closed on October 1, structured as an 80% quota share on a full risk-transfer basis, with Manulife retaining administration of the policies. No transfer of assets occurred, and the transaction represents a significant move in the reinsurance market’s approach to LTC risk pricing.
Standalone Structure Offers Market Clarity
The standalone nature of the transaction allows the reinsurance market to better assess LTC biometric pricing without the complexity of bundled liability classes. Munich Re Life US, the group’s U.S. life reinsurance subsidiary, took on morbidity risk exclusively, without other lines cushioning volatility. Pricing remained consistent with prior deals, with a negative 5% cede indicating Manulife paid Munich Re above the reserve value to assume the risk, reflecting the reinsurer’s return expectations on the capital it deployed.
This structure contrasts with earlier transactions, such as the 2024 deal with Global Atlantic, which bundled LTC with structured settlements and Japan whole life business, and the RGA deal closed in January 2025, pairing LTC with structured settlements. The narrow pricing range across three transactions with different counterparties and block structures suggests growing market confidence in valuing pure LTC exposure.
Challenges in LTC Risk Pricing
LTC morbidity risk is notoriously difficult to price due to uncertainties like rate increase approvals. A 2024 Milliman survey, covering 17 carriers representing more than 75% of the industry by premium volume, found that only 73% of submitted rate increases were fully or partially approved, with the top rejection reason being political caps or non-actuarial factors. This regulatory constraint forces insurers to reserve for potential premium adjustments that may not materialize, increasing volatility in LTC portfolios and complicating reinsurance pricing models.
Read Also: Tata heir challenges board over Chandrasekaran reappointment process
Manulife’s 2024 annual report noted it received approval for over 90% of premium increases embedded in its reserves as of its 2022 actuarial assumption review, validating its reserving approach. This track record likely influenced Munich Re’s pricing decisions. Large-scale LTC reinsurance was largely absent from the market until recently, with Milliman describing the market as having been very quiet for a number of years. The three large LTC transactions since late 2023 marked a clear uptick, signaling renewed buyer confidence in valuing LTC risks.
Market Trends and Future Outlook
The Manulife-Munich Re deal provides a clearer benchmark for valuing standalone LTC blocks. Milliman’s February 2026 analysis projected continued momentum in 2026 and 2027 as buyer confidence grows. The standalone structure narrows assumptions about how the market values pure LTC biometric exposure, offering a reference point for future deals. Combined with the earlier transactions, the close brings Manulife’s cumulative reduction in LTC morbidity sensitivity to 24%, a sign that Manulife’s ongoing portfolio optimization work is not yet finished.
Manulife’s CEO Phil Witherington stated the transaction reflects the company’s ability to reduce risk and strengthen its business through innovative actions. He also highlighted opportunities for further portfolio optimization, indicating ongoing efforts to improve risk-adjusted returns. Milliman’s 2024 LTC rate increase survey provides additional context on regulatory challenges affecting pricing.
