British Airways insured £4.4 billion ($5.7 billion) in liabilities of its Airways Pension Scheme, Hounslow, England, in a buy-in with Legal & General, a spokeswoman said.
The bulk annuity, the largest U.K. risk transfer deal to date, covers about 60% of all pensioner liabilities of the plan. The transaction incorporates existing longevity reinsurance contracts of around £1.7 billion that APS entered with Canada Life Reinsurance and PartnerRe, the release said.
The pension fund, which is 90% hedged and is for employees hired before 2003, previously entered into two longevity swaps and a synthetic buy-in that are not part of this deal.
"This transaction is the latest in a number of insured arrangements entered into by the Airways Pension Scheme. It demonstrates the vision and determination of the trustee to reduce risk and increase security for participants. Today's announcement is the culmination of much hard work undertaken over several months and we are pleased to be taking this significant step in the scheme's derisking journey," Virginia Holmes, chairwoman of the pension fund's trustee, said in a news release.
Ben Stone, pensions director at PriceWaterhouseCoopers, which was the lead transaction adviser, said in the release: "Completing a deal of this size in the busiest ever year for pension buy-ins shows that the market is working well. High demand from pension funds puts pressure on insurer assets and manpower but those funds with well-planned approaches to market continue to access positive derisking insurance opportunities."
Allen & Overy, Eversheds Sutherland and Willis Towers Watson also advised the trustee on the transaction. Clifford Chance provided legal advice to L&G.
Airways Pension Scheme had £7.3 billion in assets during a 2012 valuation and £7.2 billion following a 2014 update to that valuation. A more recent asset size could not be learned.