Swiss Re has completed a GBP 800 million longevity insurance contract with the pension fund of UK insurer LV=. The transaction includes insurance of longevity exposures for 1,000 members who are still to retire.
Swiss Re's latest longevity insurance agreement covers over 5,000 individuals who were members of the LV= Employee Pension Scheme as of 31 December 2011. The agreement covers a broader population than previous pension market longevity transactions, extending beyond in payment pensioners to also cover members not yet retired down to age 55.
Russell Higginbotham, Swiss Re's UK Chief Executive Officer, says: "Our clients seek risk transfers solutions with a counterparty who can deliver. We are pleased to have worked closely with LV= and the pension plan trustees to tailor a solution that precisely meets their objectives. A key requirement was to efficiently maximise the extent of the longevity coverage. The result is the first ever pension plan longevity contract that insures the exposure of members yet to retire."
This agreement confirms reinsurers as a natural home for longevity risk given their financial strength and ability to commit to the long-term cover needed for longevity risk.
Costas Yiasoumi, Swiss Re's Head of Longevity Solutions says: "Longevity contracts are very long-dated and clients need counterparties that are in this market for the long haul. We offer financial strength, a successful track record and the immediate and long-term benefits of dealing with a longevity end-risk holder. When the client made the strategic decision to implement longevity protection, Swiss Re was a natural counterparty to consider."
The LV= transaction confirms Swiss Re's position as the leader in the longevity swap market, having transferred over USD 12 billion in longevity liability to its own books.
The market is becoming more aware of longevity risk. Swiss Re's ability to execute complex transactions with the balance sheet capacity to support them places the company in a good position for future opportunities.
Alison Martin, Member of Swiss Re’s Group Management Board and Head Life & Health Reinsurance, says: "Swiss Re has led the development of the longevity market and we expect demand for longevity solutions to continue. We will remain selective in how we apply our longevity capacity to deliver customised solutions for our insurance clients."
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