The trustees of the Airways Pension Scheme have agreed a £340m longevity swap with Metropolitan Tower Life Insurance Company, a subsidiary of MetLife, and Zurich Assurance Ltd.

The arrangement is designed to provide long term protection to the scheme against costs resulting from members living longer than currently expected, enhance security for members, by transferring longevity risk in respect of active and deferred members of the scheme in addition to members with pensions in payment.

WTW acted as lead adviser to the trustees on the deal, while legal advice was provided by Sackers and Kramer Levin. MetLife was advised by Eversheds Sutherland and Zurich UK was advised by Slaughter & May.

The policy is structured as an insurance arrangement between the scheme trustees and Zurich UK, and a back-to-back reinsurance arrangement between Zurich UK and MetLife using Zurich UK’s pass-through solution.

This pass-through structure means MetLife assumes 100 per cent of the longevity risk associated with around 1,100 members of the scheme, and the trustees and MetLife take on mutual credit risk exposure to each other.

Sackers partner, Ralph McClelland, highlighted the deal as demonstration that longevity transactions are an "increasingly practical and viable solution" for schemes including in relation to smaller tranches of liability.

“The trustees, Zurich and MetLife, with their respective advisers, have worked collaboratively to deliver a fantastic outcome for the scheme and its members, insuring both pensioner and non-pensioner liabilities," he stated.

This was echoed by WTW managing director and lead adviser to the trustee, Shelly Beard, who said: "This is the second longevity swap announced in 2024 covering less than £1bn of liabilities, and the fifth in recent years to include non-pensioners, which goes to show that hedging longevity risk in this way is an option available to schemes of all shapes and sizes.

“This transaction marks the latest step in the trustees’ long-term strategy to manage risks in the scheme and we were delighted to support with this, including working closely with the trustees to design an innovative method for transferring non-pensioner longevity risk."

Adding to this, MetLife head of RIS risk solutions, Jay Wang, said: “MetLife's history and extensive expertise in risk management positions us well to offer Airways Pension Scheme greater certainty in managing its longevity risk.

"We are pleased to have been selected as the reinsurance partner for this transaction.

"In line with MetLife's New Frontier strategy, our financial strength, flexibility and strong track record in risk management underscores our commitment to supporting pension schemes and insurers manage their risk and our dedication to provide innovative and transformative solutions."

Zurich head of longevity risk transfer, Greg Wenzerul, added: “We are delighted to have played a part in supporting the trustees deliver this transaction, which provides a cost effective, straightforward and flexible (for the trustees' benefit) approach to hedging longevity risk.

"We believe that the standardisation available through use of the Zurich platform, which has now been used with the vast majority of longevity reinsurers, provides an opportunity for smaller schemes to transact in an efficient and increasingly standardised manner.

"We will continue to support and encourage the further development of this market, especially with many pension schemes and sponsors increasingly weighing up longer-term risk management pathways.”

This article was originally published on our sister website, Pensions Age.

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