FTSE 100 energy firm SSE PLC, Perth, Scotland, completed two buy-ins and a longevity swap to hedge £1.15 billion ($1.5 billion) in longevity risk.
The £2.2 billion Scottish Hydro-Electric Pension Scheme covered about £250 million of liabilities through a buy-in with Pension Insurance Corp., and a further £800 million in longevity risk through a deal with Legal & General. A news release by Hymans Robertson, lead adviser on all the deals, said this was the first transaction to use L&G's "U.K.-based pass through" structure, transferring the longevity risk to a reinsurer. The name of the reinsurer could not be learned by press time.
The second buy-in, also completed with PIC, covers about £100 million of liabilities for the £1.1 billion Scotia Gas Networks Pension Scheme. Both transactions were completed within three weeks of selecting the insurer, said the release. Trustees of both funds were advised by law firm CMS.
"Reducing risk over time is an absolute priority for us and it is important to do this in the most cost-effective way," said Tony Fettiplace, chairman of trustees for the Scotia Gas Networks Pension Scheme, in the release.
Regarding the decision to combine a buy-in with a longevity deal, James Mullins, head of risk transfer buyout solutions at Hymans Robertson, said in an emailed comment: "Our detailed knowledge of insurer and reinsurer pricing indicated that this combination would give them the best value approach to hedge their longevity risk. The actual pricing that was obtained proved this to be the case. It won't work for every pension scheme, but this powerful combination is well worth considering."
