Pensions - Articles - Pensions longevity swaps could treble this year says PwC

 PwC has developed a platform with Artex Risk Solutions, one of the leading global captive managers, to lower the cost of a longevity swap. 

  

 This new structure, Iccaria, provides pension funds with direct access to reinsurers and will open up the longevity market to pensions schemes with liabilities as low as £250 million. As opposed to other models in the market, Iccaria gives pension schemes a choice over who operates the contract, potentially leading to lower costs overall.

  

 Paul Kitson, partner in PwC’s pensions team, said:

 “Since the first pension scheme longevity swap in 2009 there has only been around four to five deals each year. Innovative new captive vehicles, such as Iccaria, mean that deal volumes could treble this year. Pension schemes that previously viewed longevity swaps as too expensive, or who thought they were too small to access this market, are likely to re-think their options given the changes in the market.

  

 “PwC’s pensions and captive experience, together with Artex’s new captive vehicle, allows our pension clients to transfer longevity risk at a much lower cost while retaining the flexibility over how the longevity hedge is administered.

 “Now is a great time for any company looking to remove risk from their pension scheme due to the new longevity swap structures and attractive reinsurer pricing. Our experience on deals in 2014 shows that the cost of hedging longevity can often be lower than the funding reserves calculated by pension schemes. In addition to this, the door to the longevity swap market is now fully open for smaller pension schemes and in 2015 we expect a number of sub £100m transactions to take place for the first time.”