The UK’s largest corporate defined benefit (DB) pension scheme has struck two longevity reinsurance deals with Swiss Re and Reinsurance Group of America.
The £36bn pension scheme announced a pair of £5bn longevity swaps today (21 March), with Swiss Re and Reinsurance Group of America (RGA).
The deals build upon a £5bn deal with RGA completed in 2023, and a £16bn longevity swap with Prudential Insurance Company of America in 2014.
As part of the 2014 arrangement, the BT Pension Scheme set up a wholly owned insurance company to facilitate the reinsurance contract. The latest deals also used this “captive” insurer structure.
Longevity reinsurance protects pension schemes from the cost of unexpected increases in the life expectancy of members.
The transactions were led by Brightwell, the BT Pension Scheme’s fiduciary manager and services provider. The pension scheme was also advised by WTW and law firm A&O Shearman.
Jill Mackenzie, chair of trustees for the BT Pension Scheme, said: “These transactions help to advance the development of the scheme’s long-term investment strategy, providing increased certainty for the scheme, our sponsor, and members.”
Wyn Francis, chief investment officer at Brightwell, said being able to secure two concurrent longevity swaps “demonstrates the value in a fully integrated fiduciary manager”.
He added: “These transactions will be onboarded to Brightwell’s automated, efficient and low-cost operating platform, reinforcing our experience and capability in managing all scheme risks to achieve market-leading outcomes for a scheme in run-on.”
Other recent longevity swap deals include a £340m insurance deal between the Airways Pension Scheme and insurers Zurich and MetLife, which was announced in December. In November, the Merchant Navy Ratings Pension Fund agreed a deal with MetLife to manage longevity risk in relation to around £450m worth of pensioner and dependant liabilities.
Lara Desay, head of risk transfer at Hymans Robertson, told Pensions Expert recently that longevity reinsurance could help some schemes with their run-on strategies.
She explained: “It is possible that we see some larger schemes turn to longevity swaps in order to mitigate the risk of members living longer than expected, as this would typically be the largest unhedged risk in those schemes seeking to run on.”
