Lloyds Banking Group has completed a £5.5bn (€6.5bn) longevity swap deal with SCOR and Scottish Widows for its Lloyds Bank No. 1 Pension Scheme.
The transaction, which covers the liabilities of over 17,000 members of the scheme, comes after the group completed a similar deal with Scottish Widows and Pacific Re at the beginning of 2020 – a £10bn longevity swap, the second largest UK de-risking transaction at the time.
The current transaction is structured as an insurance policy where Scottish Widows, a subsidiary of Lloyds Banking Group, acts as an intermediary insurer while SCOR provides 100% reinsurance coverage, it was announced.
In return for a series of fixed premiums, SCOR agrees to meet claims based on the pensions actually paid to members of the scheme.
Laurent Rousseau, SCOR’s chief executive officer, said that this was the firm’s largest longevity transaction to date.
“Recent world events such as the pandemic have underscored the uncertainty associated with life expectancy and the strategic necessity to provide adequate reinsurance solutions,” he added.
Both SCOR and Scottish Widows were selected as providers after a full and robust selection process carried out by the scheme’s trustee.
SCOR was advised by global law firm CMS, while WTW was the adviser to the trustee for the transaction.
Matt Wiberg, WTW, Advisor to the Trustee, said that the trustee has now hedged more than £15bn of the Lloyd Banking Group schemes’ longevity risk “providing greater certainty in relation to their long-term journeys”.
“The infrastructure established by the first transaction in 2020 was crucial in running an efficient process that enabled the trustee to benefit from a market opportunity to further reduce longevity risk in a cost-effective manner,” he said.