Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Swiss Re in first longevity contract including pension fund members yet to retire


Reinsurer Swiss Re has announced the completion of an £800m ($1.3 billion) longevity insurance transaction with UK insurer LV=. The transaction see’s Swiss Re providing longevity insurance for over 5,000 members of the LV= pension fund and includes the longevity exposures associated with 1,000 members who are yet to retire. Swiss Re said that this is the first longevity contract wit a pension fund to include members who have not yet retired.

With the completion of the this longevity  contract, Swiss Re extends their longevity reinsurance track record to over $12 billion of risk, which they say confirms their position as one of the leaders in the longevity swap market. Having transferred $12 billion of longevity liabilities across from clients to their own books, one has to wonder when Swiss Re will begin to seek to transfer more of that risk to the capital markets by repeating their Kortis Capital longevity risk securitization ILS.

This latest longevity insurance agreement with LV= see’s Swiss Re take on the longevity exposure associated with 5,000 individuals who were members of the LV= Employee Pension Scheme as at the 31st December 2011. This deal provides broader cover that typical pension fund longevity risk transfers as it the cover it provides extends beyond in payment pensioners to also cover members not yet retired down to age 55.

Russell Higginbotham, Swiss Re’s UK Chief Executive Officer, commented; “Our clients seek risk transfers solutions with a counterparty who can deliver. We are pleased to have worked closely with LV= and the pension plan trustees to tailor a solution that precisely meets their objectives. A key requirement was to efficiently maximise the extent of the longevity coverage. The result is the first ever pension plan longevity contract that insures the exposure of members yet to retire.”

Swiss Re said that the agreement demonstrates reinsurers ability and suitability to take on longevity risk, given their financial strength and ability to commit to the long-term cover required under these transactions. However we still believe that at some point a pipeline to the capital markets is going to be required as the concentrations of longevity risk build up in key market players like Swiss Re.

Costas Yiasoumi, Swiss Re’s Head of Longevity Solutions said; “Longevity contracts are very long-dated and clients need counterparties that are in this market for the long haul. We offer financial strength, a successful track record and the immediate and long-term benefits of dealing with a longevity end-risk holder. When the client made the strategic decision to implement longevity protection, Swiss Re was a natural counterparty to consider.”

Swiss Re believe that as the awareness of longevity risk transfer in its many forms grows they are well positioned to capitalise on this through their ability to execute complex transactions with the balance sheet capacity to support them.

Alison Martin, Member of Swiss Re’s Group Management Board and Head Life & Health Reinsurance, said; “Swiss Re has led the development of the longevity market and we expect demand for longevity solutions to continue. We will remain selective in how we apply our longevity capacity to deliver customised solutions for our insurance clients.”

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