SCOR reinsures Legal & General £300m longevity deal

Legal & General has entered the longevity insurance market for smaller schemes by completing a £300 million longevity insurance contract with an unnamed mid-tier pension scheme.

The transaction is fully intermediated, with Legal & General reinsuring 100 percent of the transaction to global reinsurer SCOR.

To date, competition for longevity insurance contracts has been limited for smaller schemes, with the majority typically transacted in conjunction with much larger schemes, Legal & General noted.

The streamlined structure of the contract ensures that ongoing requirements for trustees are straightforward and easy to manage, according to Legal & General. It also keeps fixed costs to a minimum, thus ensuring competitive pricing for schemes of this size, the company added.

“This innovative transaction has allowed the scheme to use insurance to remove the risk to the scheme’s liabilities of its pensioner members living longer than expected, whilst still benefiting from any returns that it receives on the assets it retains,” said Chris DeMarco, managing director UK pension risk transfer.

“Smaller pension schemes often feel that the only insurance options they have are traditional buy-in or buyout structures. This transaction demonstrates that longevity insurance is a realistic option for most pension schemes, including for trustees whose schemes are not quite at the point they can enter into buy-in or buyout but want to manage their longevity risk,” DeMarco added.

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