The Trustee of the ICL Group Pension Plan, a Fujitsu pension scheme, has insured longevity risk in respect of £3.7 billion of its liabilities, with Swiss Re providing the reinsurance coverage. The hedge covers pensions in payment for approximately 9,000 members of the plan and provides long term protection against additional costs resulting from pensioners or their dependents living longer than expected. The trustee, while working with its advisers, was able to optimise pricing by utilising a new Insight Investment platform to provide access to the reinsurance market via a trustee owned Guernsey insurance cell. Commenting on the transaction, David Sillitoe, Trustee chair of the ICL Group Pension Plan, says: “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 adds: “Furthermore, attractive reinsurer pricing combined with an efficient approach to access the reinsurance market using a Guernsey-based captive insurance company, has allowed us to remove this risk in a cost-effective manner.” Willis Towers Watson (WTW) led the transaction as actuarial and transaction adviser to the Trustee with Gowling WLG and Momentum Investment Solutions and Consulting providing legal and investment advice respectively. Matt Wiberg, senior director at WTW notes: “This transaction represents another exciting development in the longevity market, with the structuring of the swap through Insight Investment’s new intermediary platform.” “On behalf of the trustee, WTW is delighted to have successfully implemented the swap using this structure and to have led the price and commercial negotiations, resulting in the removal of a substantial element of risk at an attractive price,” he adds. Swiss Re received legal advice from Pinsent Masons. Insight Investment will act as calculation agent, collateral manager and collateral valuation agent as well as providing longevity transaction reporting services.
