LONDON, May 2, 2023 – The Yorkshire and Clydesdale Bank (YCB) Pension Scheme has today announced a longevity swap transaction with Pacific Life Re International Limited (“PL Re”) and Zurich Assurance Ltd (“ZAL”) to manage longevity risk in relation to c£1.6 billion of pensioner liabilities. The arrangement provides long term protection to the Scheme against costs resulting from pensioners or their dependants living longer than currently expected, enhancing security for Scheme members.
The longevity insurance policy is structured as an insurance arrangement between the Trustee and ZAL, and a back-to-back reinsurance arrangement between ZAL and PL Re using ZAL’s pass-through solution. Under this pass-through structure PL Re assumes 100% of the longevity risk associated with around 9,000 members of the Scheme and the Trustee and PL Re take on mutual credit risk exposure to each other. The arrangement will form part of the Scheme’s investment portfolio and will provide income to the Scheme in the event that members live longer than currently expected.
Inder Dhingra, Chairman – Yorkshire and Clydesdale Bank (YCB) Pension Scheme said:
“The Trustee is delighted to have completed this longevity swap which will provide significant protection for our members against the costs associated with future increases in life expectancy. I would like to thank the Bank, PL Re, ZAL and our advisers for working collaboratively to help us reduce one of the Scheme’s largest risks and improve the security of our members’ benefits as a result.”
Justin Fox, Group Treasurer at Virgin Money UK PLC, said:
“Virgin Money is pleased to have worked with the Trustee in the delivery of this transaction, which demonstrates the Group’s support for the pro-active management of pension risks.”
“We worked closely with the Trustee and the Bank throughout the whole process, from considering the options available for accessing the longevity reinsurance market through to negotiating terms with PL Re and ZAL.”
Sadie Scaife | WTW
Sadie Scaife, WTW, lead adviser to the Trustee, said:
“We’ve worked with the Trustee for several years to consider the optimal approach to managing longevity risk in the Scheme and we are thrilled to have advised the Trustee on this transaction. We worked closely with the Trustee and the Bank throughout the whole process, from considering the options available for accessing the longevity reinsurance market through to negotiating terms with PL Re and ZAL. The transaction was negotiated and implemented over a period of significant volatility in the market and goes to show that longevity swaps continue to be an effective risk management option for pension schemes. There is strong appetite in the reinsurance market for longevity risk and we’re pleased to have helped the Trustee to take advantage of the current market opportunity.”
Paul Phillips, Sackers, legal adviser to the Trustee, said:
“We were delighted to advise and support the Trustee on this important transaction, which marks a key milestone in the Scheme’s management of risk and underlines their commitment to securing member benefits. It was very much a team effort with all parties working efficiently and collaboratively with the Scheme to ensure the transaction completed smoothly and successfully for the benefit of members.”
Howie Timothy, PL Re, Business Development Director, said:
“We are incredibly proud to have worked with the Trustee of the Scheme on this transaction and for another opportunity to work alongside the WTW and Zurich teams. This transaction is the result of a huge amount of collaboration and acts as another great example of how the reinsurance sector can offer strength and capacity to assist pension schemes in meeting their de-risking objectives. As demand for longevity risk transfer increases, Pacific Life Re looks forward to working together with our clients to enable sustainable growth and offer further stability for pension scheme beneficiaries.”
Greg Wenzerul, Head of Longevity Risk Transfer at ZAL, said:
“We are pleased our solution matched the Trustee’s requirements for their de-risking journey. This transaction was executed efficiently due to effective and pragmatic collaboration by the parties involved.”
In addition to WTW and Sackers, the Trustee received legal advice from Walkers. PL Re was advised by CMS and ZAL was advised by Slaughter & May.
Pacific Life Re works with clients in the UK, Ireland, Asia, Australia, and North America to provide mortality, morbidity, longevity, and capital solutions reinsurance products and services. Pacific Life Re International Limited is a wholly owned subsidiary of Pacific Life. For further information, please see our website.
Zurich UK provides a suite of general insurance and life insurance products to retail and corporate customers. We supply personal, commercial and local authority insurance through a number of distribution channels, and offer a range of protection policies available online and through financial intermediaries for the retail market and via employee benefit consultants for the corporate market. Based in a number of locations across the UK - with large sites in Birmingham, Farnborough, Glasgow, London, Swindon and Whiteley - Zurich employs approximately 4,500 people in the UK.
At WTW (NASDAQ: WTW), we provide data-driven, insight-led solutions in the areas of people, risk and capital. Leveraging the global view and local expertise of our colleagues serving 140 countries and markets, we help organizations sharpen their strategy, enhance organizational resilience, motivate their workforce and maximize performance.
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The defined benefit pensions de-risking market is likely to see one of its biggest years on record in 2023, with £60bn in bulk annuity and longevity hedge transactions expected to be completed
