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Hannover Re reinsures longevity risk for PIC & Philips pension buyout


German reinsurance firm Hannover Re has entered into a longevity reinsurance transaction with Pension Insurance Corporation (PIC) simultaneously with the completion of the largest ever full pension insurance buyout between PIC and the Philips UK Pension Fund.

Pension Insurance Corporation, the specialist insurer of defined benefit pension funds, announced the completion of a £2.4 billion pension insurance buyout with the Trustees of the Philips UK Pension Fund today.

The buyout covers the pension benefits of around 26,000 UK pension scheme members, including the associated longevity risks.

As has been the case with previous large buyouts we’ve reported on, one of the important features of the deal is the ability for the longevity risk to be hedged at the same time as the insurance buyout is entered into.

Reinsurer Hannover Re has provided this risk transfer, simultaneously providing reinsurance of the longevity risk to PIC. Another innovative feature of this transaction is the fact that the cohort for which the longevity risk has been reinsured includes what is being termed “an unprecedented level of non-retired members.”

David Jordan, Chairman of Trustees for the Philips pension fund, commented; “This has been a complex transaction given the size and history of the Fund. I want to thank Philips for their support and PIC for their hard work and flexibility in securing these pension liabilities for the long-term.”

Jay Shah, Head of Origination at PIC, added; “Increasingly, we are seeing multi-national organisations successfully settling their pension obligations through pension insurance arrangements such as this. It is becoming part and parcel of modern commercial thinking. We are delighted to have worked with Philips on this ground-breaking arrangement.

“This has been a very successful year so far for PIC with £3.5 billion of new business written to date, taking our assets under management to more than £16 billion.”

Read details of many recent longevity swaps, longevity reinsurance and longevity risk transfer transactions here.

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