The Yorkshire and Clydesdale Bank (YCB) Pension Scheme has announced a longevity swap transaction with Pacific Life Re International and Zurich Assurance to manage longevity risk in relation to £1.6 billion of pensioner liabilities.
The arrangement will provide long term protection to the scheme against costs resulting from pensioners or their dependants living longer than currently expected.
The longevity insurance policy is structured as an insurance arrangement between the trustee and Zurich Assurance, and a back-to-back reinsurance arrangement between Zurich and Pacific Life Re using Zurich’s pass-through solution.
Under this pass-through structure Pacific Life Re assumes 100% of the longevity risk associated with around 9,000 members of the scheme and the trustee and Pacific Life Re take on mutual credit risk exposure to each other.
The arrangement will form part of the scheme’s investment portfolio and will provide income to the scheme in the event that members live longer than currently expected.
“The Trustee is delighted to have completed this longevity swap which will provide significant protection for our members against the costs associated with future increases in life expectancy,” said Inder Dhingra, Chairman of the YCB Pension Scheme.
“I would like to thank the Bank, PL Re, ZAL and our advisers for working collaboratively to help us reduce one of the Scheme’s largest risks and improve the security of our members’ benefits as a result,” Dhingra added.
Howie Timothy, Pacific Life Re Business Development Director, also commented: “We are incredibly proud to have worked with the Trustee of the Scheme on this transaction and for another opportunity to work alongside the WTW and Zurich teams.”
“This transaction is the result of a huge amount of collaboration and acts as another great example of how the reinsurance sector can offer strength and capacity to assist pension schemes in meeting their de-risking objectives,” Timothy continued. “As demand for longevity risk transfer increases, Pacific Life Re looks forward to working together with our clients to enable sustainable growth and offer further stability for pension scheme beneficiaries.”
Greg Wenzerul, Head of Longevity Risk Transfer at Zurich Assurance, further stated: “We are pleased our solution matched the Trustee’s requirements for their de-risking journey. This transaction was executed efficiently due to effective and pragmatic collaboration by the parties involved.”
WTW acted as the lead advisor to the trustee for this transaction, while Sackers served as legal advisor, with additional legal advice provided by Walkers. Pacific Life Re was advised by CMS and Zurich Assurance. was advised by Slaughter & May.
