The Willis Pension Scheme has entered into a longevity swap transaction with global reinsurance giant Munich Re, under which the reinsurer will manage the longevity risk in relation to c£1 billion of pensioner liabilities.
This longevity reinsurance transaction covers roughly 3,500 Scheme members, providing long-term protection for the Scheme against additional costs as a result of pensioners or their dependants living longer than expected.
Munich Re has assumed the longevity risk via a Guernsey based Captive Insurance Company fully owned by the Trustee of the Scheme, established under Willis Towers Watson (WTW) Guernsey ICC Limited.
According to insurance and reinsurance broker WTW, this is part of its Longevity Direct solution which allows pension schemes to use a ‘ready-made’ incorporated cell company to access the reinsurance marketplace.
Head of Transactions at WTW and lead adviser, Ian Aley, said: “The longevity swap market is currently very buoyant and represents an opportunity for pension schemes such as the Willis Pension Scheme to manage a material risk whilst retaining the flexibility to achieve the required investment returns to complete their journey plan. Completing this transaction despite some challenging circumstances following the recent lockdown demonstrates how collaborative working can deliver outstanding results.”
Chair of the Willis Pension Scheme, Peter Routledge, added: “I am delighted that the Trustee has taken a first and significant step to ensure that our members’ benefits are secured against future improvements in life expectancy, supplementing the Trustee’s wider risk management program to protect the Scheme against investment and demographic volatility.
“The transaction was concluded effectively, enabling us to access the longevity swap markets whilst pricing was attractive relative to Scheme funding. Having considered the options for accessing the reinsurance market we concluded that Longevity Direct offered the best value solution for our Scheme.”
Martin Lockwood, Head of Longevity at Munich Re, said: “This transaction demonstrates Munich Re’s experience and commitment in the Longevity market and its ability to adapt to a challenging working environment.”
WTW led the advice on the transactions, with Travers Smith LLP, Carey Olson (Guernsey) LLP, and Hengeler Mueller providing legal advice to the Trustees. Lincoln Pensions Limited advised on the reinsurer financial strength. Legal advice was provided to Munich Re by Sidley Austin LLP.
Sebastian Reger, Partner at Travers Smith and legal advisers, said: “Lawyers from our multi-disciplinary Pension De-Risking Practice are proud to be part of the team of advisers and Trustees which delivered this land-mark transaction for the Scheme.”
Martin Membery, Partner at Sidley Austin, added: “Lawyers from the Sidley insurance and finance teams have been working seamlessly with Munich Re on the structuring and successful execution of this complex transaction.”