Legal and General Assurance Society Limited (L&G) has completed a £300m longevity insurance deal with an unnamed pension scheme.
L&G said the deal is with a mid-tier pension scheme, covering £300m of liabilities. The transaction marks L&G’s entry into the longevity insurance market for these relatively smaller schemes. To date, competition for longevity insurance contracts has been limited for smaller schemes, with the majority typically transacted in conjunction with much larger schemes.
The streamlined structure ensures that ongoing requirements for trustees are straightforward and easy to manage; it also keeps fixed costs to a minimum, thus ensuring competitive pricing for schemes of this size. The transaction is fully intermediated, with L&G reinsuring 100 per cent of the transaction to global reinsurer SCOR.
The trustee was advised by the scheme’s trustee advisers Willis Towers Watson and Eversheds.
Commenting, L&G Retirement Institutional managing direcrtor UK pension risk transfer, Chris DeMarco, said: “This innovative transaction has allowed the scheme to use insurance to remove the risk to the scheme’s liabilities of its pensioner members living longer than expected, whilst still benefiting from any returns that it receives on the assets it retains.
“Smaller pension schemes often feel that the only insurance options they have are traditional buy-in or buyout structures. This transaction demonstrates that longevity insurance is a realistic option for most pension schemes, including for trustees whose schemes are not quite at the point they can enter into buy-in or buyout but want to manage their longevity risk.
“We were delighted to work with the trustee, their advisers and the reinsurer on this case, providing not only a solution that works for this scheme, but which can also be easily replicated for other schemes in a similar position.”