Swiss Re has completed a GBP 1.4 bil-lion longevity insurance contract with one of the UK pension funds of Akzo Nobel N.V., written through Swiss Re's UK sub-sidiary ReAssure Ltd. The agreement reinforces Swiss Re's position as a leader in the longevity market, where it remains the only insurer to have successfully deployed large net capacity to take on longevity risk directly from a pension fund.
The agreement covers close to 17 000 individuals and their future contingent beneficiaries who were members of the Akzo Nobel (CPS) Pension Scheme at 1 August 2011.
Costas Yiasoumi, Head Longevity Solutions, Swiss Re Corporate Solutions, says: "We are proud to once again take the lead in longevity insurance. We offer a unique proposition. Whereas the UK pension longevity market tends to be dominated by intermediaries who write and then sell on the exposure, this deal stands out in that all of the longevity exposure is held on our own balance sheet."
This deal is consistent with Swiss Re's pioneering work in the longevity insurance market. In 2007, the company was a leader in the longevity hedge market with its benchmark transaction with Friends Provident. In 2009, it closed a GBP 1.0 billion longevity insurance contract for the Royal County of Berkshire Pension Fund. In 2010, the company issued USD 50 million of longevity trend risk bonds to the capital markets through the Kortis Capital Ltd. ("Kortis") securitisation programme.
The latest transaction confirms that pension funds and insurers are becoming more comfortable with longevity solutions. It also highlights Swiss Re's ability to put its large net capacity to work by creating innovative solutions for both public and corporate sector clients.
Alison Martin, Member of Swiss Re’s Group Management Board and Head of Life & Health, says: "The pension funds of corporate and public sector organisations are gaining a better understanding of the potential risks arising from their longevity exposures. As a natural home for longevity risk and with a track record in innovation, Swiss Re is in a unique position to engage directly with these funds and create the solutions they need."
"Our strong mortality position means that Swiss Re has capacity to take on more longevity risk, and maintain our position as the re-/insurer of choice in the UK and abroad."
AkzoNobel and the trustees chose Swiss Re having evaluated proposals from different counterparties.
Costas Yiasoumi says: "Longevity contracts are very long-dated and pension fund trustees need counterparties that are in this market for the long haul. As a well-diversified re-/insurer with a 150-year track record, we were able to give AkzoNobel, the pension plan trustees and its advisors the necessary confidence for the long-term."
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