Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

MMC UK pension gets £2bn longevity swap backed by Munich Re


The MMC UK Pension Fund has entered into a £2 billion longevity swap and reinsurance arrangement with Munich Re, its first swap to include active members, via a captive Guernsey insurance cell.

Mercer, part of Marsh McLennan and advisor to the MMC UK Pension Fund Trustee Limited, has announced the completion of the longevity swap, which covers approximately £2 billion of liabilities for roughly 14,500 pensioners, deferred and active defined benefit members of the pension fund.

The longevity risk was insured through a captive Guernsey insurance cell and simultaneously reinsured with Germany’s Munich Re.

The Mercer Marsh longevity captive solution uses Guernsey-based Mercer ICC Limited, an incorporated cell company, managed by March Captive Solutions Guernsey. For this longevity swap transaction, a new incorporated cell, Fission Gamma IC Limited, was used to transfer risk to Munich Re.

This £2 billion transaction comes after the fund’s £3.4 billion longevity swaps previously transacted in 2017 with two other reinsurers in respect of DB sections’ longevity risk. Mercer says that this latest deal is a further significant de-risking step with almost all of the MMC UK Pension Fund’s DB sections’ longevity risk now insured.

The longevity swap and reinsurance agreement includes active members and according to Mercer, is the second largest UK pension fund swap covering more non-pensioner members than pensioners.

“We see this additional longevity hedge as a natural next step as we look to reduce risk within the fund. The trustee and Marsh McLennan commissioned a full market review of the whole reinsurance market and also selected the ‘Mercer Marsh’ longevity captive solution as the route to implement this longevity hedge,” said Trustee Chairman, Bruce Rigby.

Suthan Rajagopalan, lead transaction adviser for the trustee and Head of Longevity Reinsurance at Mercer, commented, “What is distinctive about this transaction is that longevity risk of active members is covered as well as over 75 per cent of this longevity swap being comprised of non-pensioners, managing the long-term exposure of the fund to improvements in longevity.”

“Longevity risk is a key risk for defined benefit schemes and the longevity reinsurance market is more developed than ever in the historically-challenging, non-pensioner heavy sector of pension risk transfer and can now deal with ‘active’ members. As part of this transaction, we have advised on and managed a broad and highly competitive process to remove this long-term risk,” added Rajagopalan.

View details of many longevity swaps and longevity reinsurance deals in our longevity risk transfer deal directory.

Artemis Live - ILS and reinsurance video interviews and podcastView all of our Artemis Live video interviews and subscribe to our podcast.

All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance video content and video interviews can be accessed online.

Our Artemis Live podcast can be subscribed to using the typical podcast services providers, including Apple, Google, Spotify and more.

Print Friendly, PDF & Email

Artemis Newsletters and Email Alerts

Receive a regular weekly email newsletter update containing all the top news stories, deals and event information

  • This field is for validation purposes and should be left unchanged.

Receive alert notifications by email for every article from Artemis as it gets published.