Dutch insurer Aegon and Deutsche Bank have agreed a EUR12bn life expectancy swap deal that will help the insurer to provide solutions for Europe’s ageing population.

The deal, largest of its kind to date, will not only protect the insurer if lifespans increased quickly than actuarial projections but also in the event if payout was more than expected for client pensions.

Deutsche structured insurance solutions head Clare Hennings said that the idea was to improve the capacity of insurers and pension funds to pass on risk outside the traditional reinsurance market.

The bank’s longevity markets group co-head Michael Amori said that the transaction was about finding a way to help a client transfer risk to others willing to take the risk on in exchange for a return.

According to Aegon, the deal covered one-third of reserves in its Dutch business and reduced the amount of capital it required.

Aegon has recently made the last of a series of redress payments to British pension clients, which is part of a programme by the UK financial authorities in 2010.

Longevity swaps were also accepted by reinsurers such as Hannover Re, the German reinsurer, which hedged a EUR1bn portfolio of 11,500 pensioners’ obligations for Legal & General in January 2012.