Lloyds Banking Group pension fund trustees have entered into two new longevity insurance and reinsurance arrangements to protect a further £5.1bn (€6.1bn) of liabilities with Rothesay Life, Pacific Life Re and a US-based insurance subsidiary of Prudential Financial.
The new longevity insurance and reinsurance arrangements cover £2.1bn and £3bn of pensioner liabilities in the Lloyds Bank Pension Scheme No.2 and the HBOS Final Salary Pension Scheme, respectively.
Both transactions are structured as insurance policies with Rothesay Life, which bought Scottish Widows’s in-force bulk annuity portfolio from Lloyds Banking Group as the insurer, back in March 2024.
The reinsurance for the transactions is provided by Pacific Life Re International for the Lloyds No.2 fund and the insurance subsidiary of Prudential Financial for the HBOS fund.
These latest transactions follow previous insurance and reinsurance arrangements that the trustees entered into with Scottish Widows – a £10bn longevity swap in 2020, and a £5.5bn longevity swap in 2022 – across the Lloyds Banking Group pension schemes.
WTW acted as lead adviser for the trustee, with A&O providing trustees with legal advice.
Vicky Paramour, trustee director and chair of the funds’ investment and funding committee, said: “We are pleased to have successfully completed these transactions which further reduce the schemes’ exposure to longevity risk and make the schemes more secure to the benefit of all members.”
She added that the selection of Rothesay, Pacific Life Re. and PFI followed a “fair, robust and transparent” review of the longevity insurance and reinsurance options available in the market.
Ben Howe, head of reinsurance at Rothesay, added that within a busy pension risk transfer market, the transactions demonstrate the continued high demand for longevity protection for UK pension schemes as part of their wider strategy to mitigate potential funding volatility.
He continued: “A collaborative and solutions-led approach across all parties, with legal advice provided by Eversheds Sutherland, facilitated a timely and efficient process in the completion of both insurance and reinsurance arrangements.”
Howie Timothy, business development director at Pacific Life Re, said: “Having worked with the trustee[s] on their first longevity hedge in 2019/20, we were pleased to see how previous hard work can pave the way for a smooth and efficient second execution.”
Read the digital edition of IPE’s latest magazine
No comments yet