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Pacific Life Re reinsures giant £10bn UK longevity swap for Lloyd’s Bank pensions


Global life, longevity and morbidity reinsurance firm Pacific Life Re has completed the second largest UK longevity swap transaction on record, taking on UK £10 billion of longevity risk from Lloyd’s Banking Group pension funds.

pacific-life-re-logoThe longevity swap arrangement has been entered into with Lloyds Banking Group Pensions Trustees Limited, on behalf of certain pension schemes from the Group.

It’s the second largest UK longevity swap after the £16 billion BT Pension Scheme deal from back in 2014.

The longevity swap arrangement saw Scottish Widows Limited acting as an insurer and entering into longevity agreement structured as an insurance policy with the Lloyd’s Bank pension schemes.

Pacific Life Re acted as the onwards reinsurance capital sources, taking on the longevity exposure associated with £10 billion of pensioner liabilities in certain Lloyds Banking Group pension schemes.

The longevity risk transfer coverage will protect the Lloyd’s Bank pensions against the financial risk of an unexpected increase in the life expectancy of its members, ultimately making the future of the pension schemes more secure.

Andy McAleese, Pacific Life Re, Head of Longevity, commented on the transaction, “Pacific Life Re has been a long-term supporter of longevity risk transfer, having completed the first UK pension scheme longevity swap in 2009. There have been record volumes of pension risk transfer in 2019 and we are continuing to see very strong demand carrying over into 2020. This milestone arrangement demonstrates that longevity swaps continue to be an important risk transfer tool for pension schemes.”

Simon Bramwell, Pacific Life Re, Project Lead, also said, “We are delighted to have worked with the Trustee and its advisors and, in particular, the level of clarity and engagement they brought to the process. In a busy marketplace, being clear and decisive on data, terms and timescales gives everyone confidence in the process and has resulted in a positive outcome for all. I’d also like to thank CMS in providing direct and pragmatic legal advice, helping to ensure that a significant and complex transaction was completed quickly and efficiently.”

Thomas Lockley, CMS, legal adviser to Pacific Life Re, added, “A tremendous amount of credit should go to the Trustee, Scottish Widows and Pacific Life Re for completing a significant transaction in such an efficient and collaborative manner. It is a great example to the market of the risk capacity, advisor capacity and commercial will to negotiate and transfer complex risks in short timeframes. CMS are proud to have supported Pacific Life Re on the transaction.”

Ian Aley, Willis Towers Watson, Head of Transactions, stated, “This material transaction is further evidence of pensions schemes’ appetite to manage longevity risk. The longevity swap market is currently showing a huge amount of demand from pension schemes, and reinsurers like Pacific Life Re are certainly rising to the challenge through both innovation and record-breaking transaction sizes, as well as efficient execution.”

The longevity swap market is forecast to experience record levels of activity in 2020, thanks to availability of reinsurance capital and demand from pensions. Availability and the cost of risk capital and reinsurance to support longevity risk transfer is a key driver of activity for the market.

This £10 billion UK longevity swap deal is a strong start to the year.

Read details of many longevity hedging transactions in our longevity swap, reinsurance and risk transfer deal directory.

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