Global reinsurer SCOR has completed a £5.5 billion longevity reinsurance transaction, covering liabilities of more than 17,000 members of the Lloyds Bank No. 1 Pension Scheme.
This landmark transaction is SCOR’s largest ever longevity deal and protects the trustee of the scheme by transferring the risk that members live longer than expected.
The transaction is structured as an insurance policy where Scottish Widows Limited, a subsidiary of Lloyds Banking Group, acts as an intermediary insurer as SCOR provides 100% longevity reinsurance protection.
Under the agreement, SCOR receives a series of fixed premiums and in return agrees to meet claims based on the pensions actually paid to members of the scheme.
The trustee selected SCOR and Scottish Widows after a full and robust selection process.
The French reinsurer was advised by global law firm CMS and re/insurance broker WTW was the adviser to the trustee for the transaction.
Laurent Rousseau, SCOR’s Chief Executive Officer (CO), commented: “This is our largest longevity transaction to date. It reaffirms SCOR’s commitment to supporting pension scheme de-risking in the UK and globally. Recent world events such as the pandemic have underscored the uncertainty associated with life expectancy and the strategic necessity to provide adequate reinsurance solutions.
“We are pleased to provide protection and certainty to the Lloyds Bank pension members and broaden our Life & Health franchise.”
Matt Collins, Head of Longevity Business Development at SCOR, said: “It was a great pleasure working with the Trustee and its advisors at WTW on such a milestone transaction for SCOR. The investment put in by the Trustee and WTW on previous transactions significantly helped make this a smooth and efficient process. I would like to thank all the parties who worked together with us for the successful completion of this significant transaction.”
For SCOR, this deal successfully delivers on its longevity growth strategy and the company says that it sees continued strong demand for longevity protection. This strong growth trajectory further underscores the firm’s broader strategy to expand and diversify its Life & Health franchise.
For Lloyds Banking Group, this arrangement follows the £10 billion of liabilities covered across the scheme by Pacific Life Re in 2020.
Vicky Paramour, Trustee Director and Chair of the Investment & Funding Committee, said: “We are pleased to have successfully completed these longevity insurance and reinsurance arrangements with Scottish Widows Limited and SCOR. This will reduce the Scheme’s exposure to longevity risk and make the Scheme more secure to the benefit of all members.
“The selection of Scottish Widows Limited and SCOR followed a fair, robust and transparent review of the longevity insurance and reinsurance options available across the market and their respective propositions delivered the best combination of benefits to meet our brief.”
Lara Desay, Head of Origination and Operations at Scottish Widows, added: “We are delighted to be able to extend our relationship with the Trustees in their de-risking journey. This transaction demonstrates the continued high demand for longevity protection for UK pension schemes to mitigate funding volatility. We are also grateful to our legal advisor Eversheds Sutherland, SCOR and advisors on all sides of the deal for the collaborative approach adopted to complete this complex transaction.”
