Balfour Beatty Pension Fund Secures £1.7 Billion Longevity Swap with SCOR and Zurich Assurance

The Balfour Beatty Pension Fund in London has agreed to a £1.7 billion ($2.1 billion) longevity swap transaction with SCOR and Zurich Assurance. The Trustee for the defined benefit fund, Balfour Beatty Pension Trust Ltd., manages £3 billion and 27,000 participants, with the swap covering 15,000 of these individuals. SCOR will take on 100% of the longevity risk while Zurich U.K. will act as an intermediary insurer through a “pass-through” structure that facilitates the risk transfer to SCOR. Aon was lead adviser on the transaction, providing legal advice to the trustee via CMS and to SCOR via Eversheds Sutherland. Tom Scott from Aon commented that this transaction marks a further step in the fund’s derisking journey and is “further evidence of a vibrant insurance/reinsurance market, which is offering commercially attractive pricing and terms to pension schemes”. Insight Investment was appointed as collateral manager and collateral valuation agent; Serkan Bektas from Insight Investment noted that managing longevity risk is an important consideration for UK pension schemes today, particularly against a backdrop of changing monetary policy and economic conditions.

Summary

• Balfour Beatty Pension Fund, London, agreed to a £1.7 billion ($2.1 billion) longevity swap transaction with SCOR and Zurich Assurance.
• SCOR will take on 100% of the longevity risk.
• Aon was lead adviser on the transaction; Insight Investment was appointed as collateral manager and valuation agent.

What risks did the Balfour Beatty Pension Fund transfer to SCOR through the longevity swap transaction?

The risks transferred to SCOR through the longevity swap transaction were 100% of the longevity risk.
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Picture source: Lachlan Gowen