Pension fund secures protection for longevity risk
A $1. 26 billion (£1 billion) pension fund for merchant navy sailors has used its captive insurer to manage longevity risk in relation to around $569 million (£450 million) of pensioner and dependent liabilities.
The trustee of the Merchant Navy Ratings Pension Fund has entered into the transaction with Metropolitan Life Insurance Company through its Guernsey-based captive.
The arrangement provides long-term protection to MNRPF against costs resulting from pensioners or their dependents living longer than expected and enhances security for MNRPF members.
MNRPF said the longevity insurance forms part of MNRPF’s investment portfolio and is structured as an insurance contract with a captive insurer in Guernsey and onwards reinsurance to MetLife.
Melanie Cusack, Trustee, MNRPF, said: “I am delighted that the Trustee has taken an important step to ensure that our members’ benefits are strongly secured against increases in life expectancy.
“This is a continuation of our de-risking journey, and we are pleased to have completed the deal with attractive economics. This is a positive step in providing both additional security for members’ pensions and certainty for employers.”
Jay Wang, head of risk solutions at MetLife, said: “MetLife’s long history and expertise in risk management positions us well to offer greater certainty for MNRPF in relation to its longevity risk. We are pleased to have been selected for the reinsurance of this transaction, This transaction demonstrates MetLife’s commitment to supporting solutions which help pension schemes and insurers manage longevity risk.”
Shelly Beard, managing director at WTW and lead adviser to the Trustee, said: “This transaction demonstrates that longevity swaps are an option for smaller tranches of liabilities. We worked with the Trustee to achieve a competitive reinsurer selection process and attractive economics relative to the Fund’s reserves.
“It was a pleasure to work with MetLife to agree a transaction that met their, and the Trustee’s, objectives, and to ensure that the Trustee’s future flexibility is maximised.”
WTW acted as lead adviser to the Trustee, with Linklaters as legal adviser and Carey Olsen providing additional advice to the Trustee. Eversheds Sutherland provided legal advice to MetLife
The Trustee’s captive is managed by WTW Guernsey.
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