Zurich completes £50m pension fund longevity swap

by Artemis on October 18, 2016

Insurance group Zurich has completed another longevity swap transaction, helping an unnamed pension fund enter into a risk transfer arrangement covering £50m of pension longevity liabilities and with 75% of the risk transferred to reinsurance firm Pacific Life Re.

Zurich has been active in the longevity swap space in recent months, having completed two longevity deals covering £600m of liabilities for pension funds of the Pirelli group back in August.

This latest deal saw Zurich retain 25% of the longevity risk from the unnamed pension fund, with Pacific Life Re providing reinsurance for the remaining 75%. Mercer acted as adviser on the longevity swap transaction.

This is the fourth so-called streamlined longevity swap that Zurich has carried out with its partners for smaller-sized defined benefit pension schemes, and the third in 2016.

Jim Sykes, Zurich’s Chief Operations Officer, commented; “We are delighted to announce this transaction. The cost and complexity of carrying out a longevity hedge has typically precluded schemes with fewer members from de-risking in the past. The scale of this transaction shows how the streamlined solution can make longevity risk hedging accessible to smaller pension schemes.

“The deal, coming shortly after our £600m transaction with Pirelli, reaffirms Zurich’s appetite to write business across a diverse size range within this market.”

Andy McAleese, Head of Annuity Transactions at Pacific Life Re, added; “We are pleased to continue our partnership with Zurich and to have helped the scheme trustees reduce their exposure to longevity risk. This transaction demonstrates that longevity cover can be priced and executed quickly and that pension schemes now have a greater choice of options to meet their risk management needs.”

By partnering with Pacific Life Re these longevity swaps can be effected with guaranteed reinsurance capacity on the back-end by Zurich, enabling the firm to retain what it wants and immediately transfer the bulk on to a specialist reinsurer.

Reinsurance markets appetite for longevity risk remains high at this time, leading to an expectation that the availability of longevity swaps to smaller pension funds will continue while costs could continue to drop making the transactions more efficient.

View details of many historical longevity swap and reinsurance transactions in our Longevity Risk Deal Directory.

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