Balfour Beatty Pension Fund agrees £1.7bn longevity swap

The Balfour Beatty Pension Fund has agreed a £1.7bn longevity swap transaction with SCOR and Zurich Assurance Ltd.

The deal will protect the scheme against the risk of costs rising from pensioner members and their dependants living longer than expected.

The transaction used Zurich’s pass-through solution, under which the trustee and reinsurer have mutual credit risk exposure, in turn providing the trustee with future flexibility, control and security, while minimising cost, governance and operational burden.

Aon’s risk settlement team acted as the lead adviser on the transaction, while legal advice was provided to the trustee by CMS, and Insight Investment was appointed as collateral manager and collateral valuation agent.

Aon partner, Tom Scott, highlighted the transaction as a further step in the fund’s de-risking journey, pointing to the deal as "further evidence of a vibrant insurance/reinsurance market, which is offering commercially attractive pricing and terms to pension schemes".

Adding to this, Insight Investment head of client solutions group, Serkan Bektas, noted that longevity expectations have fluctuated "significantly" over the past two decades, explaining that "managing longevity risk is understandably a major consideration for UK pension schemes today".

"Insight expects longevity to be the subject of greater focus over the next decade as UK pension schemes consider their funding positions against a backdrop of changing monetary policy and economic conditions," he added.

Indeed, the Balfour Beatty Pension Fund deal also follows a recent £1bn longevity swap between the UK pension scheme of an unnamed Fortune 500 company, and PartnerRe and Zurich.

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