Longevity swap news

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.

Reinsurance firm SCOR has hired seasoned longevity risk transfer executive Wolfgang Murmann to be the firms new Head of Longevity for the EMEA region, picking him up from asset management giant Insight Investment where he worked on solutions for pensions and institutions.

UK headquartered life and annuities insurance and reinsurance company Legal & General has hired Pretty Sagoo from Deutsche Bank to the role of Head of the Strategic Business in its pension risk transfer team.

As new mortality data feeds through into longevity insurance and reinsurance market pricing, Aon Hewitt says it sees promising signs that once pricing is absorbed and ready for clients to use it could result in a “significant year” for longevity risk transfer in 2017.

In response to the new Continuous Mortality Investigation (CMI) model, recent reductions seen in national mortality improvements can no longer be regarded as a “blip” and have put the pension longevity swap and reinsurance market into a state of flux, according to Aon Hewitt.

Last year was a testing one for the market in longevity swaps, as both pensions and reinsurance markets reacted to changes in mortality expectations driven by new data, creating market uncertainty, Aon Hewitt said.