MMC UK Pension Fund's first longevity swap transaction to include active members, under incorporated cell Fission Gamma IC Limited, will cover approximately £2 billion in liabilities for 14,500 pensioners, deferred and active defined benefit members.
Fission Gamma, a new Guernsey-based incorporated cell, was created to insure the longevity risk of the fund and to reinsure this risk with leading global re-insurer Munich Re. Insuring longevity risk in this way enables the fund to protect itself financially against longevity risk.
The Guernsey aspects of the transaction were advised by law firm Carey Olsen, including partner Christopher Anderson, senior associate Alex Mauger and associate Oliver Orton. The fund was advised by Mercer, a wholly owned subsidiary of Marsh McLennan.
Using special purpose insurance companies (SPVs) in the form of an incorporated cell to transfer longevity risk to the reinsurance market has become somewhat standard practice in Guernsey, with incorporated cells being used in all longevity transactions structured through Guernsey to date.
This transaction is the third longevity swap structured through the Mercer ICC. Carey Olsen also advised on the two prior transactions and has advised on all 17 such transactions structured through Guernsey vehicles in respect of 10 pension trustees.
Learn more about using Guernsey SPVs to hedge against longevity risk here.
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