RGA in £5bn longevity swap for Barclays UK pension scheme

Reinsurance Group of America (RGA) has provided the Barclays Bank UK Retirement Fund, a pension scheme and fund managing assets on behalf of UK employees of the bank, with a UK £5 billion longevity swap transaction.

The Barclays pension explained today that entering into the longevity swap arrangement with global life and annuities focused reinsurance player RGA will help to ensure it can meet obligations to its members and reduces risk related to increasing life expectancy.

By transferring the longevity risk associated with a significant number of its members, the Barclays Bank UK Retirement Fund is able to gain a more predictable funding outlook, leveraging the appetite of a large global reinsurance firm to increase the security of its benefit provision to pensioners going forwards.

Insight Investment, a global asset and risk manager with UK £731.5 billion under management said this morning that it has been appointed as collateral manager for the longevity swap transaction between the Barclays Bank UK Retirement Fund and RGA.

“We are very pleased to partner with the Barclays Bank UK Retirement Fund as it takes the next step on its de-risking journey,” Serkan Bektas, Head of Insight’s Client Solutions Group explained. “This transaction is particularly timely given that longevity risk is receiving increased focus among pension schemes and we are well positioned to work closely with our clients who are seeking to maximise certainty of outcome and achieve greater overall investment efficiency in their risk management frameworks.”

The Barclays UK pension fund has been working to reduce its deficit and improve its funding levels for a while now, with this longevity swap now set to play a key role in securing the benefits future for its pensioners.

“RGA is delighted to partner with the Trustee of the Barclays Bank UK Retirement Fund on a transaction that demonstrates RGA’s dedication to working with clients in the UK, and around the world, to meet their risk management objectives,” Larry Carson, Executive Vice President, Global Financial Solutions, RGA said.

“In addition to the material reduction of deficit revealed at the 2019 actuarial valuation, the longevity swap is another significant step in our de-risking journey for the UKRF, improving benefit security for all members,” added Peter Goshawk, the Chairman of the Trustee. “I would like to thank Barclays for their support on this project and also to thank the Barclays’ pension team, RGA, and our advisers for helping us to complete a successful transaction.”

In 2020 there have been a number of large pension longevity swap arrangements and even more longevity reinsurance transactions as the market remained active despite the influence of the pandemic.

We’ve got UK £21.1 billion of longevity swaps listed in our deal directory for 2020, making this the biggest year in the longevity swaps market for some time.

Aon advised on this latest longevity swap issuance.

Martin Bird, senior partner and head of Risk Settlement at Aon, commented, “It’s great that Aon was able to bring together all the necessary expertise – including our market-leading demographic analytics, our diverse experience of the risk settlement market and insurance capabilities – to support this significant transaction. We worked closely with the Trustee of the UKRF in tailoring an insurance structure solution to hedge the fund’s specific longevity risk profile following a competitive reinsurance selection process.”

Tom Scott, principal consultant in Aon’s Risk Settlement team, added, “This transaction, along with others in the pipeline, demonstrates the capacity and appetite of the global reinsurance market to take on pension fund longevity risk, even in these challenging times. Despite the current economic climate, pension schemes can still successfully access the reinsurance market in an effective manner.”