The Merchant Navy Officers Pension Fund (MNOPF) has hedged £1.5 billion of longevity risk following the creation of a Guernsey based insurer.
The transaction covers the longevity risk in respect of 16,000 pensioner members of the fund.
The agreement is structured as an insurance agreement between the MNOPF and MNOPF IC, a new and specially established Guernsey company, and a reinsurance agreement between MNOPF IC and Pacific Life Re.
Rory Murphy, MNOPF chairman, said: “Today’s announcement is good news both for our members and employers. This innovative transaction significantly reduces the overall risk in the fund and is a positive step on our journey to achieve full funding.”
Ensign Pensions provide executive services to the MNOPF, with Towers Watson appointed as delegated chief investment officer.
Andrew Waring, Ensign Pensions & MNOPF chief executive, added: “The MNOPF has a reputation for using innovative insurance solutions to manage risk and improve security for members – as demonstrated by the successful buy-out of Old Section benefits last year.”
“Longevity was a significant, concentrated risk for the fund and, having considered the different options available, the trustee board decided that Towers Watson’s longevity direct structure was the most cost effective and efficient structure. This, combined with attractive reinsurer pricing, allowed us to hedge longevity risk without any material impact on our broader journey plan.”
Merchant Navy Officers Pension Fund, Towers Watson, Europe, Pacific Life Re