MNOPF hedges £1.5bn of longevity risk with Pacific Life Re

The trustee of the Merchant Navy Officers Pension Fund has hedged £1.5bn of longevity risk, covering over 16,000 pensioners in a deal with Pacific Life Re.

The agreement is structured as an insurance agreement between the MNOPF and MNOPF IC Limited, a new and specially established Guernsey company, and a reinsurance agreement between MNOPF IC Ltd and Pacific Life Re.

MNOPF chairman Rory Murphy said the transaction significantly reduces the overall risk in the fund and is a “positive step” towards achieving full funding.

Ensign Pensions provide executive services to the MNOPF and its chief executive Andrew Waring noted longevity was a “significant concentrated risk” for the fund.

“The MNOPF has a reputation for using innovative insurance solutions to manage risk and improve security for members, as demonstrated by the successful buyout of Old Section benefits last year,” he added.

Pacific Life Re head of annuity transactions Andy McAleese said the transaction provides “greater certainty for the MNOPF in relation to its longevity risk”.

Towers Watson were the lead advisers on the transaction and Norton Rose Fulbright provided legal advice.

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