A Fujitsu pension scheme – the ICL Group Pension Plan – has insured its longevity risk over £3.7bn (€4.3bn) in liabilities with Swiss Re providing the reinsurance coverage.
The scheme, under the advice of Willis Towers Watson (WTW), was also able to optimise pricing by using a new Insight Investment platform to provide access to the reinsurance market via a trustee-owned Guernsey insurance cell.
The Insight Investment platform was built specifically to facilitate the use of longevity swaps by pension schemes, said Serkan Bektas, head of client solutions group at the firm.
“Our aim is to pioneer flexible and efficient approaches to hedging longevity risk,” he added.
The hedge covers pensions in payment for approximately 9,000 members and provides long-term protection against additional costs resulting from pensioners or their dependants living longer than expected, WTW said.
David Sillitoe, trustee chair of the scheme, said: “By hedging the longevity risk associated with our pensioners, we have significantly reduced the overall risk in the plan and improved security for all our members.”
He added that an “attractive reinsurer pricing combined with an efficient approach to access the reinsurance market” allowed the scheme to remove this longevity risk in a cost-effective way.
WTW led the transaction as actuarial and transaction adviser to the scheme, with Gowling WLG and Momentum Investment Solutions and Consulting providing legal and investment advice, respectively. Swiss Re received legal advice from Pinsent Masons.
Insight Investment will act as a calculation agent, collateral manager and collateral valuation agent as well as providing longevity transaction reporting services.