The swap transaction with Munich Re will cover around 3,500 scheme members, totaling £1bn in pensioner liabilities

Willis Towers Watson and Munich Re conduct pensioners liability swap transaction. (Credit: Pixabay/PublicDomainPictures.)

The Willis Pension Scheme has entered into a longevity swap transaction with Munich Re to manage the risks related to nearly £1bn in pensioner liabilities.

The transaction covers nearly 3,500 Scheme members and the longevity risk has been transferred to Munich Re via a Guernsey based Captive Insurance Company fully owned by the Trustee of the Scheme, established under Willis Towers Watson Guernsey ICC.

The transaction is part of Willis Towers Watson’s Longevity Direct solution that enables pension schemes to use ‘ready-made’ incorporated cell company to access the reinsurance market.

Willis Towers Watson transactions head and lead adviser Ian Aley said: “The longevity swap market is currently very buoyant and represents an opportunity for pension schemes such as the Willis Pension Scheme to manage a material risk whilst retaining the flexibility to achieve the required investment returns to complete their journey plan.

“Completing this transaction despite some challenging circumstances following the recent lockdown demonstrates how collaborative working can deliver outstanding results.”

The swap transaction to offer long term protection for the Scheme against additional costs

The swap transaction includes pensions in payment in the Willis Pension Scheme and will offer long term protection for the Scheme against additional costs resulting from pensioners or their dependants living longer than expected.

Munich Re longevity head Martin Lockwood said: “This transaction demonstrates Munich Re’s experience and commitment in the Longevity market and its ability to adapt to a challenging working environment.”

Willis Pension Scheme chair Peter Routledge said: “I am delighted that the Trustee has taken a first and significant step to ensure that our members’ benefits are secured against future improvements in life expectancy, supplementing the Trustee’s wider risk management program to protect the Scheme against investment and demographic volatility.”

Last month, Willis Towers Watson launched Homestead Insurance Company Incorporated Cell, a group captive solution for upper middle-market companies, in the US.

The new company will reinsure The Hartford, which will issue admitted insurance policies to members selected for the programme.

The solution is expected to offer companies a cost-efficient way to buy insurance for five-to-ten year period, while the peaks and valleys of the standard market are removed.