Plus: Merchant Navy Ratings Pension Fund has secured a £450m longevity swap with MetLife.
The transaction follows a £2.7bn buy-in for the Thales UK Pension Scheme a year ago. Thales, a multinational electronics company, is the sponsor for both pension schemes.
Aon was the lead broker on the deal while Gowling WLG and Squire Patton Boggs provided legal advice to the pension scheme’s trustee board. Rothesay was advised by Eversheds Sutherland.
Jim Robson, chair of the trustee board and a trustee director at Vidett, said: “The pension risk transfer market remains hugely competitive, so it is good to see schemes of all sizes are able to insure member benefits. This buy-in provides security for members given Rothesay’s proven offering and customer service.”
Aon’s Natalia Dinischiotu, a senior consultant, added: “Upfront preparation and close collaboration with all advisers ensured that the scheme was able to navigate an active market nimbly and to capitalise on the opportunity of working with an insurance partner that quotes selectively for this scheme size.”
She said “speed of execution” was also important in securing the transaction.
MNRPF insures against longevity risk
Elsewhere, the £1bn Merchant Navy Ratings Pension Fund (MNRPF) agreed a deal with MetLife to manage longevity risk in relation to around £450m worth of pensioner and dependant liabilities.
The transaction is designed to protect the pension scheme from the cost of pensioners living longer than currently expected.
The arrangement was structured as an insurance contract using a captive insurer based in Guernsey, with MetLife providing reinsurance.
The Merchant Navy Officers Pension Fund, a separate scheme, completed a similar longevity swap in 2015, insuring around £1.5bn through a Guernsey-based captive insurer.
More recently, M&G’s new “risk sharing” bulk annuity model uses captive insurers to share the risk and potential upside of scheme buy-ins with the sponsoring employer.
Melanie Cusack, trustee at the MNRPF, said: “This is a continuation of our de-risking journey, and we are pleased to have completed the deal with attractive economics. This is a positive step in providing both additional security for members’ pensions and certainty for employers.”
Shelly Beard, managing director at WTW and lead adviser to the MNRPF trustees, said the transaction showed that longevity swaps were accessible for smaller schemes and benefit tranches.
“We worked with the trustees to achieve a competitive reinsurer selection process and attractive economics relative to the fund’s reserves,” she added. “It was a pleasure to work with MetLife to agree a transaction that met their, and the trustee’s, objectives, and to ensure that the trustee’s future flexibility is maximised.”
