Lloyds Banking Group Pensions Trustees Limited has entered into new longevity reinsurance arrangement with Pacific Life Re

Lloyds Banking Group Pensions Trustees Limited (“the Trustee”) has entered into two new longevity insurance and reinsurance arrangements to further protect the Lloyds Banking Group pension schemes from the cost of unexpected increases in the life expectancy of its members. 

The new longevity insurance and reinsurance arrangements cover £2.1 billion and £3.0 billion of pensioner liabilities in the Lloyds Bank Pension Scheme No.2 Scheme and the HBOS Final Salary Pension Scheme (“the Schemes”) respectively.

The decision to enter into these transactions will not change the pension benefits that will be paid to members of the Schemes. All pensioners will continue to receive their pensions each month as normal, and these will continue to be paid by the Schemes. 

Both transactions are structured as insurance policies with Rothesay Life Plc. (“Rothesay”) as the insurer, with reinsurance provided by Pacific Life Re International Limited (“Pacific Life Re”) and an insurance subsidiary of U.S.-based Prudential Financial, Inc. (“PFI”), a large, multi-national financial services company, for Lloyds No.2 and HBOS respectively. 

These latest transactions follow previous insurance and reinsurance arrangements that the Trustee has entered into in 2020 (which covered £10 billion of liabilities) and 2022 (which covered £5.5 billion of liabilities) across the Lloyds Banking Group pension schemes. 

Vicky Paramour, Trustee Director and Chair of the Investment & Funding Committee, stated: “We are pleased to have successfully completed these transactions which further reduce the Schemes’ exposure to longevity risk and make the Schemes more secure to the benefit of all members. The selection of Rothesay, Pacific Life Re. and PFI followed a fair, robust and transparent review of the longevity insurance and reinsurance options available across the market.” 

Matt Wiberg, WTW, lead adviser to the Trustee, said: “The transactions with Pacific Life Re and PFI represent a further significant step in the Trustee’s strategy to reduce longevity risk and it has been a pleasure to advise the Trustee on this strategy over many years, including working closely with the Trustee and the team at A&O Shearman to negotiate the latest transactions.   These transactions were completed with separate reinsurers in a very short space of time and demonstrates continued improvements in the efficiency of contracting in the longevity swap market, particularly for schemes that have previously completed longevity swaps.” 

Philip Jarvis, A&O Shearman, legal adviser to the Trustee, remarked: “We are delighted to have advised the Trustee on these transactions, and to have been able to continue helping the Trustee reduce longevity risk across the Lloyds’ schemes. These are significant transactions in what continues to be an active market for longevity de-risking by pension schemes.” 

Ben Howe, Head of Reinsurance at Rothesay commented: “We are delighted to partner with the Trustee, Pacific Life Re and PFI to provide these de-risking solutions. Within a busy pension risk transfer market, the transactions demonstrate the continued high demand for longevity protection for UK pension schemes as part of their wider strategy to mitigate potential funding volatility. A collaborative and solutions-led approach across all parties, with legal advice provided by Eversheds Sutherland, facilitated a timely and efficient process in the completion of both insurance and reinsurance arrangements.”

Howie Timothy, Business Development Director at Pacific Life Re. added: “It was a great pleasure to support the Trustee in achieving another major de-risking milestone. Having worked with the Trustee on their first longevity hedge in 2019/20, we were pleased to see how previous hard work can pave the way for a smooth and efficient second execution. Our many thanks to all those who have made this transaction a success.”

Rohit Mathur, Head of International Reinsurance at PFI, said, “We are pleased to partner with the Lloyds Banking Group Pensions Trustees on a customized longevity transaction that helps to meet their derisking needs. It reinforces PFI’s strong client relationships as well as our continued leadership and commitment to the global pension and longevity risk transfer market.”