The Trustee of the Merchant Navy Ratings Pension Fund (MNRPF) has entered into a transaction with MetLife to manage longevity risk in relation to around £450m of pensioner and dependant liabilities.
The arrangement provides long-term protection to MNRPF against costs resulting from pensioners or their dependants living longer than expected and enhances security for MNRPF members.
This longevity insurance will form part of MNRPF’s investment portfolio. The transaction is structured as an insurance contract with a captive insurer in Guernsey and onwards reinsurance to MetLife. A captive insurer is an insurance company owned by the those being insured – in this case owned by MNRPF’s Trustee.
“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,” said Melanie Cusack, Trustee, MNRPF.
“MetLife’s long history and expertise in risk management positions us well to offer greater certainty for MNRPF in relation to its longevity risk. This transaction demonstrates MetLife’s commitment to supporting solutions which help pension schemes and insurers manage longevity risk,” added Jay Wang, Head of Risk Solutions at MetLife.
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.
“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,” said Shelly Beard, Managing Director at WTW.