The transaction covers the longevity risk in respect of 16,000 pensioner members of the Fund. 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:
“Today’s announcement is good news both for our members and employers. This innovative transaction significantly reduces the overall risk in the Fund and is a positive step on our journey to achieve full funding. ”
Ensign Pensions provide executive services to the MNOPF. Ensign Pensions & MNOPF Chief Executive, Andrew Waring, added:
“The MNOPF has a reputation for using innovative insurance solutions to manage risk and improve security for members – as demonstrated by the successful buy-out of Old Section benefits last year.”
“Longevity was a significant, concentrated risk for the Fund and, having considered the different options available, the Trustee Board decided that Towers Watson’s Longevity Direct structure was the most cost effective and efficient structure. This, combined with attractive reinsurer pricing, allowed us to hedge longevity risk without any material impact on our broader journey plan.”
“Our actuarial, investment and settlement advisers, Towers Watson, and our legal advisers on this transaction, Norton Rose Fulbright, have been outstanding in helping the Trustee achieve its goals.”
“We are delighted to have been selected for the reinsurance of this transaction, which provides greater certainty for the MNOPF in relation to its longevity risk.” said Andy McAleese, Head of Annuity Transactions of Pacific Life Re. “This transaction further demonstrates Pacific Life Re’s experience and commitment to supporting solutions which help pension schemes and insurers manage longevity risk using structures tailored to their specific needs.”
Shelly Beard, Senior Consultant at Towers Watson, said:
“This transaction is an important development for the MNOPF and for the longevity hedging market in general. Towers Watson, acting as Delegated Chief Investment Officer for MNOPF, identified that longevity was a major, growing risk for the Fund and we swiftly took action to analyse the risk and assist the scheme in brokering cost effective protection.”
“The option for schemes to access the longevity reinsurance market through a cell structure such as Longevity Direct will mean that hedging is more affordable for many schemes. It also reduces the complexity that is often associated with longevity hedging – the contractual negotiations on this transaction took less than two months. Longevity Direct offers schemes access to ‘ready-made’ incorporated cells, reducing the cost and governance requirements relative to a scheme setting up its own cell company.”
Maria Ross of Norton Rose Fulbright, who provided legal advice to the Trustee on its contract negotiations said:
“We are delighted to have assisted the MNOPF in this transaction, which marks a significant development in the longevity market through the use of a Trustee-owned cell insurer.”
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