Bell Canada in $5B longevity risk deal with Sun Life, reinsurers support

by Artemis on March 4, 2015

The Bell Canada Pension Plan, operated by BCE Inc., has entered into a groundbreaking $5 billion longevity insurance transaction with Sun Life Financial Inc., who has been supported by reinsurance capacity from SCOR Global Life and RGA Life Reinsurance Company of Canada.

Sun Life and BCE Inc. has entered into a new agreement to progress BCE’s pension de-risking strategy by transferring the longevity risk associated with $5 billion of pension plan liabilities to Sun Life Assurance Company of Canada (Sun Life). Global reinsurance capacity has supported the transaction from RGA and SCOR. The effective date of the transaction is 1 January 2015.

This transaction is groundbreaking as it is the first of its kind to be agreed in North America. The deal sees the Bell Canada Pension Plan paying monthly premiums to Sun Life in exchange for which Sun Life will make monthly pension payments into the plan for the lifetime of existing pensioners. BCE continues to maintain full responsibility for the Bell pension plan and related payments to pensioners.

“Our agreement with Sun Life is another prudent step that BCE is taking to provide greater protection and improved security for Bell Canada pensioners,” commented Siim Vanaselja, Chief Financial Officer for BCE and Bell Canada. “This agreement is an innovative way to de-risk pension obligations by taking proactive measures to guard against longevity risk without the requirement for additional cash contributions.”

“Sun Life is thrilled to have been chosen by Bell to provide this important solution for their defined benefit pension plan,” added Kevin Dougherty, President, Sun Life Financial Canada. “With our expertise in assessing and managing the financial risks that can impact defined benefit plans, Sun Life is perfectly positioned to help BCE and other Canadian companies take longevity risk off the table so they can focus even more on their core businesses.”

The deal was supported by global reinsurance capacity from leading reinsurers SCOR and Reinsurance Group of America. The transaction is a first in the Canadian market and one of the largest pension scheme longevity insurance transactions completed globally. SCOR Global Life has assumed a significant portion of this risk.

This transaction is the first longevity insurance transaction that SCOR Global Life has underwritten in North-America, the French headquartered reinsurer said. It fits as part of the firms “Optimal Dynamics” plan, under which it aims to double its longevity business.

Paolo De Martin, CEO of SCOR Global Life, commented; “This transaction is significant due to its size and the fact that it is the first longevity insurance transaction in the Canadian market. Fully consistent with SCOR’s “Optimal Dynamics” strategic plan, this transaction demonstrates our ability to leverage our successes in the UK longevity market in order to customize a solution for a Canadian client. It also further illustrates the ability of SCOR Global Life’s newly created Global Longevity team to offer its clients best-in-class solutions, leveraging its global reach.”

RGA said that it will reinsure the longevity risks associated with a significant share of the C$5 billion block of pension obligations included in this transaction, ultimately reducing longevity risks for BCE.

“We are very pleased to announce RGA’s participation in this transaction, the first of its kind in North America,” said Alka Gautam, President and Chief Executive Officer, RGA Canada. “We have delivered an important longevity risk management solution for Sun Life and for BCE, uniting the pension, insurance and reinsurance worlds.”

“RGA’s expertise in longevity risk played a critical role in securing an innovative, sophisticated risk management solution for Sun Life,” said John Laughlin, Executive Vice President, Global Financial Solutions, RGA. “Longevity risk has significant  material financial implications, and RGA’s solutions play an important role in ensuring certainty for our clients.”

This deal shows that the longevity swap or insurance transaction is alive and well in the North American market and bodes well for future deals. As is typical, the transaction featured near simultaneous reinsurance of a portion of the risks as the insurers sought support for globally active reinsurance markets.

Read about the majority of longevity deals in our directory of major longevity swap, longevity reinsurance and risk transfer transactions.

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