Willis Towers Watson’s Willis Pension Scheme has entered a longevity swap deal with Munich Re to manage longevity risk in relation to £1bn of pensioner liabilities.

The transaction covers around 3,500 members of the pension scheme.

It covers pensions in payment to the scheme and looks to provide long-term protection against additional costs when pensioners or their dependants live longer than predicted.

The risk has been transferred to Munich Re through a Guernsey based captive insurer, which is fully owned by the trustee of the scheme.

Commenting on the deal, Willis Pension Scheme chair, Peter Routledge, said: “I am delighted that the trustee has taken a first and significant step to ensure that our members’ benefits are secured against future improvements in life expectancy, supplementing the trustee’s wider risk management program to protect the scheme against investment and demographic volatility.

“The transaction was concluded effectively, enabling us to access the longevity swap markets whilst pricing was attractive relative to scheme funding.”

Willis Towers Watson led the advice on the deal, while Travers Smith LLP, Carey Olson (Guernsey) LLP and Hengeler Mueller provided legal advice to the trustees.

Lincoln Pensions provided advice on the reinsurer financial strength and Sidley Austin LLP provided legal advice to Munich Re.

Willis Towers Watson head of transactions and lead adviser, Ian Aley, said that the buoyant longevity swap market represented an “opportunity for pension schemes” to manage risk while “retaining the flexibility to achieve the required investment returns to complete their journey plan”.

“Completing this transaction despite some challenging circumstances following the recent lockdown demonstrates how collaborative working can deliver outstanding results,” he added.

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