LONDON, December 3, 2024 – The Trustee of the £1 billion Merchant Navy Ratings Pension Fund (“MNRPF”) has entered into a transaction with Metropolitan Life Insurance Company (“MetLife”) to manage longevity risk in relation to around £450 million 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.
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.
Melanie Cusack, Trustee, MNRPF, said: “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.”
Jay Wang, Head of Risk Solutions at MetLife, said: “MetLife’s long history and expertise in risk management positions us well to offer greater certainty for MNRPF in relation to its longevity risk. We are pleased to have been selected for the reinsurance of this transaction, This transaction demonstrates MetLife’s commitment to supporting solutions which help pension schemes and insurers manage longevity risk.”
“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.”
Shelly Beard | Managing Director at WTW
Shelly Beard, Managing Director at WTW and lead adviser to the Trustee, said: “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.”
Sarah Parkin, Partner at Linklaters and legal adviser to the Trustee, said: “We are delighted to have assisted the Trustee in this transaction using our market-leading de-risking practice bringing together our pensions, insurance and international expertise”.
Hugo Laing, Partner at Eversheds Sutherland and legal adviser to MetLife, said: “We’re pleased to have played a key role in this transaction, proudly supporting MetLife in helping them to deliver this deal efficiently. The collaborative approach of the Trustee and their advisors was invaluable; it was a great team to have been part of.”
The Trustee was also advised by Carey Olsen in Guernsey. The Trustee’s captive is managed by WTW Guernsey.
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WTW report on FTSE350 companies’ pension disclosures also finds that, for the first time ever, defined benefit scheme sponsors paid more into defined contribution schemes than into their DB plans.
