Fujitsu's ICL Group Pension Plan enters £3.7bn longevity hedge

The ICL Group Pension Plan has insured longevity risk in respect of £3.7bn of its liabilities, with Swiss Re providing the reinsurance coverage.

The hedge covers pensions in payment for approximately 9,000 members of the Fujitsu plan and provides long-term protection against additional costs resulting from pensioners or their dependants living longer than expected.

Willis Towers Watson (WTW) led the transaction as actuarial and transaction adviser to the trustee, with Gowling WLG LLP and Momentum Investment Solutions and Consulting providing legal and investment advice respectively.

Swiss Re received legal advice from Pinsent Masons LLP and Insight Investment is set to act as calculation agent, collateral manager and collateral valuation agent as well as providing longevity transaction reporting services.

ICL Group Pension Plan trustee chair, David Sillitoe, commented: “By hedging the longevity risk associated with our pensioners, we have significantly reduced the overall risk in the plan and improved security for all our members.

“Furthermore, attractive reinsurer pricing combined with an efficient approach to access the reinsurance market using a Guernsey based captive insurance company, has allowed us to remove this risk in a cost-effective manner.”

Insight Investment head of client solutions group, Serkan Bektas, said: “We are pleased to partner with the ICL Group Pension Plan as it takes the next step on its de-risking journey. This transaction has made broad use of Insight’s longevity platform, which we built specifically to facilitate the use of longevity swaps by pension schemes. Our aim is to pioneer flexible and efficient approaches to hedging longevity risk.”

WTW senior director, Matt Wiberg, added: “This transaction represents another exciting development in the longevity market, with the structuring of the swap through Insight Investment’s new intermediary platform.

“On behalf of the trustee, WTW is delighted to have successfully implemented the swap using this structure and to have led the price and commercial negotiations, resulting in the removal of a substantial element of risk at an attractive price.”

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