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Longevity swaps

Increasing longevity is one of the biggest risks faced by defined benefit pension schemes. A longevity swap transfers the risk of pension scheme members living longer than expected from a scheme to an insurer or bank provider as a way of minimising risk without the cost of a full buy-in or buy-out.

How can we help?

Our Pension Risk group has completed many high-profile and ground-breaking longevity swaps, and has acted on all sides of these transactions: for trustees, for sponsors and for providers. Bringing deals like this to successful completion requires a range of specialist advice beyond pensions: our Pension Risk Group includes experts from insurance, derivatives, tax, litigation and data protection, each working as part of a seamless team.

Our work has included many market firsts in terms of deal size and structure, as well as innovative features such as:

  • the use of captive insurers created specifically to enable schemes to access the longevity reinsurance market directly for improved pricing; and
  • unique features in collateral arrangements to mitigate against enforcement risk.

Longevity swaps are typically structured either as a derivative – using standard ISDA documentation – or an insurance contract, depending on the counterparty. Whichever route is used, Allen & Overy’s Pension Risk group has the expertise to manage the negotiations and transaction efficiently. Our integrated team delivers a seamless service covering all aspects of the deal from pensions investment restrictions to collateral requirements, taking account of developments in the longevity swaps market as they happen.

Pension Risk Group