WTW & MetLife provide £450m longevity swap to Merchant Navy Ratings pension

The £1 billion UK Merchant Navy Ratings Pension Fund has secured a longevity swap arrangement to cover liabilities amounting to £450 million, with the assistance of broker WTW and reinsurance capacity from MetLife.

This is the first pure longevity swap transaction we’ve seen so far in 2024.

There have been plenty of pension buy-out and buy-in transactions, as well as some that convert from longevity swap to a whole pension risk transfer, but longevity swaps have been absent from the market, at least from our vantage point this year.

This longevity swap has been transacted via a Guernsey captive insurer owned by the pension fund’s trustee, that has fronted the pension for the longevity swap transfer, while then entering into a longevity reinsurance agreement with MetLife, which absorbs the full risk from the deal.

As with all longevity swap and risk transfer deals, the goal is to transfer the liability associated with certain pensioners and dependents living longer than anticipated, with only the longevity risk transacted and no pension assets changing hands.

Melanie Cusack, Trustee at the Merchant Navy Ratings Pension Fund (MNRPF), commented, “I am delighted that the Trustee has taken an important step to ensure that our members’ benefits are strongly secured against increases in life expectancy. This is a continuation of our de-risking journey, and we are pleased to have completed the deal with attractive economics. This is a positive step in providing both additional security for members’ pensions and certainty for employers.”

Jay Wang, Head of Risk Solutions at MetLife, the reinsurance capacity provider, added, “MetLife’s long history and expertise in risk management positions us well to offer greater certainty for MNRPF in relation to its longevity risk. We are pleased to have been selected for the reinsurance of this transaction, This transaction demonstrates MetLife’s commitment to supporting solutions which help pension schemes and insurers manage longevity risk.”

Shelly Beard, Managing Director at WTW, the lead adviser to the Trustee for this deal, also said, “This transaction demonstrates that longevity swaps are an option for smaller tranches of liabilities. We worked with the Trustee to achieve a competitive reinsurer selection process and attractive economics relative to the Fund’s reserves. It was a pleasure to work with MetLife to agree a transaction that met their, and the Trustee’s, objectives, and to ensure that the Trustee’s future flexibility is maximised.”

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