Airways Pension Scheme completes £340m longevity swap

Airways Pension Scheme has completed a longevity swap transaction to transfer longevity risk in relation to £340m of its liabilities with Metropolitan Tower Life Insurance Company, a subsidiary of Metlife, and Zurich Assurance.

The longevity insurance policy is structured as an insurance arrangement between the scheme trustees and Zurich UK, and a back-to-back reinsurance arrangement between Zurich UK and MetLife using Zurich UK’s pass-through solution.

Under this pass-through structure, MetLife assumes 100% of the longevity risk associated with around 1,100 members of the scheme, and the trustees and MetLife take on mutual credit risk exposure to each other.

The arrangement will provide long-term protection to the scheme against costs resulting from members living longer than currently expected, enhance security for scheme members, and transfer longevity risk in respect of active and deferred members of the scheme in addition to members with pensions in payment.

The arrangement will form part of the scheme’s investment portfolio and will provide income to the scheme in the event that members live longer than currently expected.

WTW acted as lead adviser to the trustees for the transaction, while legal advice was provided by Sackers and Kramer Levin. MetLife was advised by Eversheds Sutherland, and Zurich UK was advised by Slaughter & May.

Shelly Beard, WTW’s lead adviser to the trustees, said the transaction marks the latest step in the trustees’ long-term strategy to manage risks in the scheme.

She said: “This is the second longevity swap announced in 2024 covering less than £1bn of liabilities, and the fifth in recent years to include non-pensioners, which goes to show that hedging longevity risk in this way is an option available to schemes of all shapes and sizes.”

Earlier this month Merchant Navy Ratings Pension Fund (MNRPF) has insured the longevity risk associated with around £450m of pensioner and dependant liabilities with MetLife.

Jay Wang, head of RIS risk solutions at MetLife, said: “MetLife’s history and extensive expertise in risk management positions us well to offer Airways Pension Scheme greater certainty in managing its longevity risk.

“In line with MetLife’s New Frontier strategy, our financial strength, flexibility and strong track record in risk management underscores our commitment to supporting pension schemes and insurers manage their risk and our dedication to provide innovative and transformative solutions.”

Greg Wenzerul, head of longevity risk transfer at Zurich UK, added: “We believe that the standardisation available through use of the Zurich platform, which has now been used with the vast majority of longevity reinsurers, provides an opportunity for smaller schemes to transact in an efficient and increasingly standardised manner.:

He added: “We will continue to support and encourage the further development of this market, especially with many pension schemes and sponsors increasingly weighing up longer-term risk management pathways.”

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