The third longevity insurance deal in Canada sees The Co-operators assume the longevity risk for CAD 660 million (approximately USD 500 million) of pension plan liabilities from the Co-operative Superannuation Society (CSS) Pension Plan.
The longevity arrangement is designed to provide greater financial security to more than 6,300 members of the defined contribution CSS Pension Plan, which provides optional guaranteed lifetime retirement income.
Under the terms of the agreement, the CSS Pension Plan is set to transfer longevity risk for CAD 660 million of pension plan liabilities to The Co-operators, in exchange for quarterly premiums. The deal sees The Co-operators pay the actual pension benefit amounts to the plan each quarter, while the CSS Plan keeps full responsibility for monthly pension plan payments to pensioners.
Martin McInnis, Executive Director of CSS, commented: “Our agreement with Co-operators is a proactive and innovative approach that prudently protects our plan’s annuity offering against longevity risk and positions CSS to continue to meet the retirement income needs of our members well into the future.”
Rob Wesseling, President and Chief Executive Officer (CEO) of The Co-operators, said: “The Co-operators is well positioned to offer longevity solutions to the Canadian market, and we recognize this risk is a growing concern for Canadian retirees and pension plan providers throughout the country.”
The Co-operators was selected following a competitive bid process, after which the firm negotiated the terms of the insurance contract with re/insurance broker Aon, who advised the CSS Pension Plan. According to an announcement on the longevity deal, a unique feature of the contract is the fact that for a group of this size, it is expected to operate on a non-collateralized basis.
William da Silva, Canadian national Director, Retirement Solutions at Aon, added: “I congratulate CSS on their foresight in considering the longevity risk faced by their members and taking action to address it. This agreement is a testimony to what can be achieved when there is a willingness to consider innovative solutions to improve member security.”
