Bentley pension scheme in £400m longevity swap with Abbey Life

by Artemis on May 2, 2013

The smallest longevity swap deal that we’ve seen has been completed, according to an article on Professional Pensions today. The £400m longevity risk transfer deal hedges the risk of pensioners living longer for luxury car manufacturer Bentley’s UK pension scheme. The size of the deal shows that longevity swaps can be transacted for smaller pension plans and suggests that costs to get a longevity swap to market may be coming down.

According to Professional Pensions the Bentley longevity swap involves Deutsche Bank’s subsidiary Abbey Life, with whom the longevity exposure associated with £400m of pension liabilities has been hedged. The deal was advised by Aon Hewitt and CMS Cameron McKenna and Travers Smith acted as legal advisors.

The Professional Pensions article suggests that the transaction took six months to complete, but Bentley had actually been looking into a longevity swap as far back as 2011, according to this FT article which at the time said Bentley was close to closing a smaller longevity swap deal. This shows that the time to market for these transactions can be a long road, particularly for a smaller pension scheme.

With this being the smallest longevity swap on record, as far as we’re aware, it does perhaps show that the market is beginning to mature enough to enable smaller pension schemes to transfer their risk. Anecdotally we’re told that frictional and transactional costs have reduced slightly as longevity swaps such as this begin to become a little more commoditised and standardised. However, there remains a great deal of customised work involved in transacting a longevity swap, so it could be some time before we see a £100m deal. When that happens though, expect the frequency of these deals to increase dramatically as smaller pension schemes look to hedge their longevity risks.

Here’s a useful list of other major UK longevity risk transfer and longevity swap transactions to date:

Date Fund Provider Approx size Solution
May 2013 Bentley Abbey Life £400m Pensioner bespoke longevity swap
April 2013 Abbey Life / Rothesay Life Hannover Re £1bn Longevity reinsurance transactions
February 2013 BAE Systems Legal & General £3.2bn Pensioner bespoke longevity swap
December 2012 LV= Swiss Re £800m Pensioner and all members over age 55
May 2012 Akzo Nobel Swiss Re £1.4bn Pensioner bespoke longevity swap
January 2012 Pilkington Legal & General £1bn Pensioner bespoke longevity swap
December 2011 British Airways Goldman Sachs / Rothesay Life £1.3bn Pensioner bespoke longevity swap
November 2011 Rolls-Royce Deutsche Bank £3bn Pensioner bespoke longevity swap
August 2011 ITV Credit Suisse £1.7bn Pensioner bespoke longevity swap
February 2011 Pall J P Morgan £70m Non-pensioners index based longevity hedge
July 2010 British Airways Goldman Sachs / Rothesay Lif £1.3bn Synthetic buy-in (longevity swap plus asset swap)
February 2010 BMW Abbey Life / Deutsche Bank £3bn Pensioner bespoke longevity swap
November 2009 Royal Berkshire Swiss Re £1bn Pensioner bespoke longevity swap
July 2009 RSA Insurance Group Goldman Sachs / Rothesay Life £1.9bn Synthetic buy-in (longevity swap plus asset swap)
May 2009 Babcock Credit Suisse £1.5bn Pensioner bespoke longevity swap (three schemes)

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