The Trustee of the LV= Employee Pension Scheme has converted a longevity swap held with UK closed life book consolidator business ReAssure – and reinsured by Swiss Re – into a £800 million buy-in with Phoenix Life.
Following the conversion to buy-in, Swiss Re will continue to cover the longevity risk by providing reinsurance to Phoenix Life.
This move is considered a way of reducing volatility in the amount of capital that LV= is required to hold in respect of DB pension scheme funding risks.
There have been at least eight longevity swaps converted into buy-ins since 2018 and appears to be a growing trend.
This implies that one in five of all publicly-announced longevity swaps have now been converted into buy-ins.
LCP advised both the Trustee and corporate sponsor on the conversion of the longevity swap into the buy-in.
CMS were appointed as transaction legal counsel and provided specialist legal advice to the Trustee.
Redington provided investment advice to the Trustee on the asset transfer and rebalancing of the residual portfolio. Phoenix Life was advised by Eversheds Sutherland.
“We are delighted to have been able to work with the Trustee and its advisors throughout the planning and execution of this transaction,” said Daniel Harrison, Global Head Longevity Solutions at Swiss Re.
“We are able to provide continuity of longevity risk protection from the original longevity swap in 2012 to the new reinsurance coverage with Phoenix Life. Our expertise and clear understanding of the requirements of all parties facilitated the efficient completion of this transaction.”
Huw Evans, Chair of the LV= Employee Pension Scheme and a Director of BESTrustees Limited, added, “This conversion is an important step in improving the security of all scheme member benefits as it removes substantial asset and market-related risks as well as longevity and other demographic risks associated with a significant group of members.
“Our advisers, LCP, CMS and Redington worked collaboratively to run an efficient process, attracting insurer interest in a busy market and driving the project to a successful conclusion.”
