Longevity risk transfer news

The British Airways Pension Scheme (APS) has entered into a £1.6 billion transfer of longevity risk, using a captive insurance cell in Guernsey to intermediate the deal and gain more direct access to reinsurance capacity, provided by Partner Re and Canada Life Re.

Marsh & McLennan Companies, the broking and consultancy giant, has transferred a huge £3.4 billion chunk of longevity risks from its MMC UK Pension Fund to reinsurance capital through a deal transacted via a Guernsey based incorporated cell company.

Insurance-linked securities (ILS) has potential in helping counterparties to achieve longevity risk transfer and in financing or backing large transactions for bulk annuity insurers, according to consultants Hymans Robertson.

Two defined benefit pension schemes of SSE plc, a FTSE 100 energy company, have entered into a novel combined transaction that enabled £1.2 billion of longevity risk to be hedged using both buy-in and insurance, with longevity risk also directly passed to reinsurance providers.

Investment banking giant Goldman Sachs has now sold down the remainder of its shareholding in UK pension risk transfer specialist life insurer Rothesay Life, with the stake being picked up by private equity giant Blackstone, Singaporean sovereign wealth fund GIC and insurer MassMutual.

The stars are aligning for the UK pension fund market, at least for those looking for de-risking solutions, as the pricing on longevity reinsurance capacity finally comes into line with new mortality data and lower-cost capacity looks set to help pensions lay off longevity risk more efficiently.

Global reinsurance firm SCOR has provided capacity to back a £1 billion longevity risk transfer transaction for specialist defined benefit pension fund insurer Pension Insurance Corporation plc (PIC).

Longevity reinsurance pricing is now back in synch following a period of dislocation as new mortality data continues to feed through into pricing, according to insurance and reinsurance broker, Aon.

Zurich Assurance and French reinsurance firm SCOR have collaborated to help a pension fund of Swedish construction firm Skanska to a £300 million longevity hedge, featuring a streamlined longevity swap backed by reinsurance capacity.

Moving from longevity hedging, through longevity swaps and other insurance or reinsurance instruments, to a full bulk-annuity buy-in, is now a viable approach to pension fund de-risking, according to Aon Hewitt.