Claims to provide longevity risk cover to local government pension fund in UK

Swiss Re has entered into its first longevity transaction with a pension fund. With this transaction, the company claims to provide the UK’s Royal County of Berkshire Pension Fund (RBPF) with protection against the uncertainty associated with longevity risk on CHF1.7 billion of pensioner liabilities.

The company said that the longevity contract transfers the longevity risk for RBPF’s existing pensioners through a straightforward insurance policy. It covers 11000 pensions of the fund that were in payment on July 31, 2009. This corresponds to approximately CHF1.7 billion of pensioner liabilities.

Swiss Re said that it insures actual floating annuity benefits to members, the cost of which depends on how long those pensioners live. The net result is that the RBPF continues to honour pension payments to its pensioners, but any future positive or negative deviation due to uncertain longevity is absorbed by Swiss Re. RBPF retains legal ownership of its assets and complete control over its investment strategy.

Christian Mumenthaler, head of life & health at Swiss Re, said: “We are very proud to announce this innovative transaction, because it is not only Swiss Re’s first longevity protection written for a pension fund, but the first pure longevity risk transfer written for any governmental body worldwide.

“This creates big opportunities for Swiss Re as market leader in life and health reinsurance. We are now pioneering longevity solutions for public sector counterparties as well as private companies, allowing them to better control the uncertainty they face with respect to longevity risk.”