The MMC UK Pension Fund has transferred £3.4bn of longevity risk in what is the industry’s largest reinsurance deal for three years.
The risk of 7,500 members of professional services group Marsh & McLennan’s retirement scheme living longer than expected has been passed to Prudential Financial and Canada Life Reinsurance.
To reduce the pension scheme’s risk without paying an upfront premium, the trustees established an insurer with its own board of directors.
This is the largest such deal since BT jettisoned £16bn of its longevity risk in September 2014.
Prudential’s head of longevity risk transfer, Amy Kessler, said this transaction reflects the fact that de-risking is the “new normal”.
“In every industry peer group, companies are choosing to reduce the longevity risk embedded in their pensions through buy-ins, buy-outs and longevity hedging,” she added.
“There remains a great deal of uncertainty with regard to future longevity improvements. Pension plans that decide to keep their longevity risk rather than hedge it are maintaining a risky strategy.
“The timing may be particularly good for non-UK sponsors to accelerate their de-risking plans to take advantage of comparatively low sterling exchange rates.”
