The trustee for the Merchant Navy Ratings Pension Fund has completed a transaction to manage longevity risk for around £450 million of pensioner and dependant liabilities.
The arrangement, which has been completed with Metlife, provides long-term protection to the pension fund, which is worth £1 billion, against costs from pensioners or dependants living longer than expected, as well as enhancing security.
The longevity insurance will form part of the pension fund’s investment portfolio. Meanwhile, the transaction is structured as an insurance contract with a captive insurer in Guernsey, which is owned by those being insured, and onwards reinsurance to Metlife.
Willis Towers Watson (WTW) acted as lead adviser to the trustee, with Linklaters as legal adviser and Carey Olsen providing additional advice. The trustee was also advised by Carey Olsen in Guernsey, while its captive is managed by WTW Guernsey. Eversheds Sutherland provided legal advice.
Melanie Cusack, trustee for Merchant Navy Ratings Pension Fund, said: “I am delighted that the trustee has taken an important step to ensure that our members’ benefits are strongly secured against increases in life expectancy. 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, added: “This transaction demonstrates that longevity swaps are an option for smaller tranches of liabilities. We worked with the trustee to achieve a competitive reinsurer selection process and attractive economics relative to the fund’s reserves.”
