RGA seals £5bn longevity swap with BTPS
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Reinsurance Group of America has secured a £5bn longevity reinsurance arrangement with the BT Pension Scheme, covering 28% of the scheme’s longevity risk.
The deal protects BTPS from the cost of unexpected increases in the life expectancy of its members.
Otto Thoresen, chair of trustees at BTPS, described longevity risk as “one of the biggest risks facing the scheme”, adding: “This transaction helps provide greater certainty for the scheme, our sponsor and members.”
The reinsurance was facilitated through an insurance intermediary via the scheme’s existing captive insurer, BTPSI.
BTPS said the transaction will have no impact on BT’s cash contributions to the scheme, nor on the 2023 triennial valuation.
Brightwell, the scheme’s primary service provider, led the transaction together with WTW and Allen & Overy. Eversheds Sutherland advised RGA on the deal.
Wyn Francis, chief investment officer at Brightwell, said: “With this transaction, we’ve taken a fresh approach using technology to drive down the time between quotation and execution. Protecting the scheme from unexpected rises in life expectancy is a core component to reaching a cash flow matched position by 2034.”
BTPS is one of the UK’s largest private sector pension schemes with around 270,000 members and £47bn of assets under management.
The latest deal follows a similar arrangement BTPS had with Prudential Insurance Corporation of America in 2014, covering £16bn of pensioner liabilities.
Recent longevity risk transfers in the UK include a £1.7bn deal Zurich UK and Prudential Financial had with the Nationwide Pension Fund in June, covering about 7,000 in-pay members in the UK.
In November, French reinsurer SCOR completed a £1.7bn longevity swap with the Balfour Beatty Pension Fund, taking on 100% of the longevity risk of more than 15,000 members. Zurich UK acted as an intermediary insurer to facilitate the risk transfer to SCOR.
How do you think longevity swaps will perform in 2023?
