Sources have told us, and the FT.com is reporting this morning, that JPMorgan have recently completed an important longevity hedging transaction which could help the market achieve its goal of becoming liquid enough for future trading to occur. The deal sees JPMorgan take on £70m worth of the longevity risks of the UK pension scheme of U.S. global filtration, separation and purification technology company Pall Corporation.
The FT says that despite the relatively small size of this transaction it is an important step forwards for the longevity risk transfer market as it is the first transaction to be structured using an index (which we assume has been constructed to be used as a method to measure losses with an ultimate trigger point, similar to catastrophe bond index triggers) and is a fixed term 10 year deal. This structure could be much more suited to being traded among capital markets investors and the ultimate goal of most participants in this market is to get to a stage where they are traded in a similar manner to catastrophe bonds.
We’ve reached out to JPMorgan and also Mercer (who advised on this deal) for further details as we’d like to be able to bring our readers more details on the structure of this transaction.
Update: We have a more recent article on this transaction which you can read here.