Legal & General has completed a £4.4 billion buy-in to British Airways’ (BA) pension scheme, Airways Pension Scheme (APS), the largest pensioner bulk annuity policy transaction ever in the UK.
The deal includes £1.6 million in pension liabilities that were insured against longevity risk using a captive.
BA set up its own Guernsey-based captive to manage the risk for the APS, which covers nearly 22,000 pensioners, in September last year.
The captive is owned by the trustee but is managed and operated independently.
Under this setup, the trustee transferred longevity risk to the captive company, which has agreed reinsurance contracts with Partner Re and Canada Life taking on the risk.
The UK pension risk transfer (PRT) market continues to demonstrate a high level of activity with Legal & General actively quoting on more than £20 billion.
Laura Mason, CEO of Legal & General retirement institutional, commented: “This transaction also included the conversion of existing longevity insurance to a bulk annuity, demonstrating Legal & General’s ability to deal with a complex situation and offer innovative solutions drawing on the broad experience and capabilities of the wider Legal & General Group.”
Nigel Wilson, CEO of Legal & General Group, said the second half of 2018 is likely to be a record six months for their PRT business.
Wilson added: “We expect to announce further transactions in the next few months.”