French reinsurance firm SCOR has participated in a UK£300 million longevity swap transaction, providing reinsurance capital to back 80% of the transaction, while insurer Zurich retained the remaining longevity risk.
It’s the first so-called streamlined longevity swap deal that SCOR has participated in, with the transaction having been facilitated through a platform to expedite longevity hedging for smaller pension funds that consultancy Mercer and insurer Zurich set up.
For SCOR, reinsuring longevity risk is attractive as it acts as a natural hedge for its life insurance business, which is largely made up of mortality risk.
Rupen Shah, SCOR’s Global Head of Longevity, explained; “SCOR’s large portfolio of mortality risk positions us as a natural holder of longevity risk. We are delighted to have secured our first transaction under the streamlined longevity swap platform Mercer has set up with Zurich.
“This diversifies the deployment of SCOR’s appetite for longevity risk alongside reinsurance of insurer annuity business and “traditional“ longevity swaps for larger pension scheme and positions SCOR well for future streamlined longevity swaps.”
Jim Sykes, Zurich’s Chief Operations Officer, added; “This deal demonstrates how using a panel of reinsurers really does provide competitive pricing for smaller liability transfers, and we are very pleased SCOR is our reinsurance partner this time.”
Suthan Rajagopalan, Head of Longevity Reinsurance at Mercer, also said; “This marks the first deal, on the platform set up by Mercer, where SCOR have been awarded the reinsurance and follows on from the smallest ever such deal at £50m announced in October 2016.
“These deals pave the way to competitive longevity reinsurance pricing for small and medium sized schemes which are more exposed to so-called “concentration risk” where there is potential for greater variability in members’ life expectancy due to diverse pension amounts. Mercer’s co-ordination of the project culminated in immediate reinsurance by Zurich with SCOR to minimise the longevity risk transfer cost for the Trustees.”