On the go: The Willis Pension Scheme has entered into a £1bn longevity swap with Munich Re, covering around 3,500 members.
The transaction will allow the defined benefit scheme of Willis Group – which merged with Towers Watson in 2016 – to manage longevity risk, with the deal covering pensions in payment and providing long-term protection “against additional costs resulting from pensioners or their dependants living longer than expected”.
The longevity risk has been transferred to Munich Re via a Guernsey-based captive insurance company fully owned by the trustee of the scheme.
Peter Routledge, chair of the Willis Pension Scheme, classified the transaction as a “first and significant” step to ensure that members’ benefits are secured against future improvements in life expectancy, “supplementing the trustee’s wider risk management programme to protect the scheme against investment and demographic volatility”.
He added: “The transaction was concluded effectively, enabling us to access the longevity swap markets while pricing was attractive relative to scheme funding.”
Ian Aley, head of transactions at Willis Towers Watson – which led the advice on the deal – said the longevity swap market is “currently very buoyant”, and represents an opportunity for pension schemes “to manage a material risk while retaining the flexibility to achieve the required investment returns to complete their journey plan”.
Travers Smith, Carey Olson (Guernsey) and Hengeler Mueller provided legal advice to the trustees, while Lincoln Pensions advised on the reinsurer financial strength and Sidley Austin provided legal advice to Munich Re.
