CMS advises Pacific Life Re on £3.7bn longevity swap

International law firm CMS has advised Pacific Life Re, a global life reinsurance firm, on a £3.7 billion longevity swap transaction with the Trustee of the Prudential Staff Pension Scheme. 

The longevity swap covers pension liabilities relating to over 20,000 pensioners in the scheme and was structured using a Guernsey-based captive. The swap will protect the scheme against the financial risk of an unexpected increase in life expectancy, making the scheme more secure to the benefit of all its members.
Thomas Lockley, Financial Services partner at CMS, comments: “We are delighted to support our long-standing client Pacific Life Re on another longevity swap transaction. CMS is a leading adviser in the pensions de-risking market and the depth of our experience was an important contributor to the success of this deal. We continue to demonstrate our unwavering ability to support our clients on complex and high value transactions of this nature.”

Elaine Murphy, Longevity Director, Pacific Life Re, adds: “It’s a huge achievement to see a deal of this size being completed despite the challenges of the COVID-19 pandemic. We would like to thank CMS for their pragmatic expert advice which played an important role in this transaction.”

The CMS team was led by Thomas Lockley and supported by Laura R Clarke, with additional support from Richard Ham, Lisa Brown and Rebecca Quinn (Financial Services), and Rebecca Carter and Maria Rodia (Pensions).

The last eighteen months have been particularly busy for the CMS De-Risking team, having advised on 8 of the 10 buy-in/out deals over £1bn in 2019, six out of the eight longevity swap conversions that have taken place to date, and many of the large-scale longevity swaps in the market including:

• Acting for Pacific Life Re on the £10bn transaction with the Lloyds Banking Group pension scheme; 
• Acting for the Trustee of the LV= Employee Pension Scheme on the conversion of a longevity swap held with ReAssure (reinsured by Swiss Re) into an £800m buy-in with Phoenix Life; 
• Acting for PIC on the conversion of the existing Guernsey-based longevity swap structure to a £1.6bn buy-in, which included advising on the simultaneous termination and reinsurance arrangements; and
• Acting for a FTSE100 trustee on the first “Enhanced Pass-Through” transaction with Zurich and Hannover Re, covering approximately £800m of pensioner liabilities.