Marsh & McLennan Companies (MMC) UK Pension Fund has completed the first ever longevity swap that includes active members, covering around £2bn of liabilities across approximately 14,500 pensioner, deferred and active defined benefit (DB) members.

The longevity risk was insured through a ‘captive’ Guernsey insurance cell, Mercer ICC Limited, and simultaneously reinsured with Munich Re.

A new incorporated cell, Fission Gamma IC Limited, was used to transfer risk to Munich Re.

The transaction is the second largest UK pension scheme longevity swap to cover more non-pensioner members than pensioners.

MMC Pension Fund Trustee Limited was advised by Mercer, Linklaters and Appleby.

Marsh McLennan was advised by Mercer and Herbert Smith Freehills, Fission Gamma IC Limited was advised by Carey Olsen, and Munich Re was advised by Fieldfisher and Ogier.

This latest transaction follows the scheme’s £3.4bn pensioner longevity swap in 2017 for its DB sections’ longevity risk and is a “further significant de-risking step”, with nearly all the scheme’s DB sections’ longevity risk now insured.

“We see this additional longevity hedge as a natural next step as we look to reduce risk within the fund,” said MMC UK Pension Fund trustee chair, Bruce Rigby.

“The trustee and Marsh McLennan commissioned a full market review of the whole reinsurance market and also selected the ‘Mercer Marsh’ longevity captive solution as the route to implement this longevity hedge.”

Mercer head of longevity reinsurance and lead transaction adviser for the trustee, Suthan Rajagopalan, added: “What is distinctive about this transaction is that longevity risk of active members is covered as well as over 75 per cent of this longevity swap being comprised of non-pensioners, managing the long-term exposure of the fund to improvements in longevity.”

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