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CMS and Willis Towers Watson advise on £6 billion longevity swap

28 April 2021

Willis Towers Watson and CMS have acted for the trustees and as lead advisers to the Joint Working Group of a large UK pension scheme on a £6 billion longevity swap.  The longevity swap protects the Scheme against the risk of its pensioner and dependant members living longer than expected.  

The longevity risk was reinsured to the International Reinsurance business of The Prudential Insurance Company of America (PICA), a wholly owned subsidiary of Prudential Financial, Inc. (PFI) (NYSE: PRU), with Zurich acting as intermediary on a “pass-through” basis, and this was the first time PFI has transacted through a structure of this kind.

Ian Aley, Head of Transactions at Willis Towers Watson, said: “We helped the Joint Working Group to understand the full breadth of available options for managing longevity risk, which was a material outstanding risk in the Scheme.  We concluded that a longevity swap would provide good value for money relative to the risk transferred, as well as enabling the Scheme to continue to run an optimised investment strategy.” 

“It has been a pleasure to partner with the CMS team on this transaction which resulted in an excellent outcome for the Scheme.  I’d also like to thank the PFI and Zurich teams for their positive and collaborative approach throughout the project, which was completed in exceptional circumstances.”  

“More widely, during the first quarter of 2021 Willis Towers Watson led deals covering in excess of £10 billion of liabilities, demonstrating the robustness of the longevity de-risking markets and that pension scheme trustees are continuing to focus on risk reduction where it is affordable.”

James Parker, Pensions Partner at CMS, said: “We very much enjoyed working with Ian and his team. Experience really matters in this market and it was crucial to the success of the transaction that both WTW and CMS have acted on a number of deals involving both Zurich and PFI. Delivering a transaction of this size and complexity in the midst of a pandemic is no mean feat and it would not have been possible without a high degree of collaboration between the trustees, sponsor, Zurich, PFI and their various advisers.”

James added: “This transaction underlines the remarkable resilience of the longevity risk transfer market. It also follows a number of other recent successes for the CMS Pensions team more widely in the de-risking space, including advising Pacific Life Re on the £10bn transaction with the Lloyds Banking Group pension scheme, acting on eight out of the 10 buy-in/out deals over £1bn in 2019, as well as six out of the eight longevity swap conversions that have taken place to date.”