Hymans Robertson has led the advice on a £800m longevity swap transaction with Zurich for a FTSE100 sponsored pension scheme (the “Scheme”). The longevity swap protects the Scheme against the risk of its pensioner and dependant members living longer than expected.

Hymans Robertson acted as lead adviser on the transaction, and, together with legal transactional counsel, CMS, negotiated a new efficient structure with Zurich to meet the requirements of the Scheme. The majority of the longevity risk was reinsured by Hannover Re, with the Scheme benefitting from diversification of counterparties under an ‘Enhanced Pass Through’ structure. The transaction was unique in its demographics and covers a significant proportion of non-UK overseas lives, providing the Scheme with valuable protection.

A representative of the Trustee said: “The Trustee is delighted to have taken this positive step in reducing risk and improving the security of members’ benefits. This continues the Trustee’s strategy to de-risk the Scheme, with this transaction significantly reducing the key outstanding risk for the Scheme. Hymans Robertson’s specialist experience in the longevity insurance market was invaluable. Through their efficiency and tailored broking approach the Scheme was able to save money at each stage of the process”

Baljit Khatra, Risk Transfer Consultant at Hymans Robertson and lead adviser, commented:The Scheme had already taken significant steps to reduce financial risks, and we identified longevity as being a material outstanding risk for the Scheme. After a thorough broking process covering reinsurance and all structuring options, we worked closely with the Trustee and Sponsor to negotiate the first ‘Enhanced Pass Through’ structure in the market. This gave the Scheme efficient access to longevity protection, whilst retaining flexibility over its future de-risking journey. The Zurich solution ticked all the boxes a captive alternative would have ticked with a number of advantages for the Scheme. Zurich’s collaborative approach led to a smooth and quick implementation despite this being a new structure with a significant proportion of overseas lives.”

James Mullins, Head of Risk Transfer at Hymans Robertson, added: “Hymans Robertson is very pleased to have helped the Trustee achieve a great outcome for the Scheme and its members. Hymans Robertson has advised on over £8bn of risk transfer deals this year, covering all types of insurance risk transfer: buy-ins, buyouts, longevity swap conversions and longevity swaps such as this transaction.”

Head of Global Pensions Risk at the Sponsor said: “This transaction supports the Trustee’s strategy to de-risk the Scheme and has been expertly led by Hymans Robertson. The terms make commercial sense for both the Trustee and for the Scheme’s sponsor. The longevity swap will provide valuable protection and support the future strategy of the Scheme.”

Greg Wenzerul, Zurich’s Head of Longevity Risk Transfer, said: “I am delighted that our solution fitted the Trustee and Sponsor’s objectives. It is a testament to all involved and the simplicity of our solution that this transaction was quick and simple to execute. This model ensures that Zurich can be competitive in the market for some of the largest transactions, while allowing schemes to benefit from the security, governance and controls associated with UK insurance companies.”

Claude Chèvre, the responsible member of Hannover Re’s Executive Board, said: “We have successfully joined forces with Hymans Robertson and Zurich in order to provide the required risk protection to this pension scheme.  As the transaction covers a significant proportion of non-UK overseas scheme members, Hannover Re was able to demonstrate its capability to act as a go-to partner for longevity solutions in an international context. The structure developed by Zurich presents an attractive alternative to the existing captive solutions. We are more than happy to support the longevity market not only with risk capacity but also with our expertise.”

Hymans Robertson led the transaction from feasibility through to execution, providing actuarial, commercial and investment advice to the Scheme. The Scheme’s transactional legal advisor, CMS, was led by James Parker. Zurich was advised by Pinsent Masons.