Lloyds Banking Group Pensions Trustees Ltd., London, insured £10 billion ($13 billion) in liabilities for its three defined benefit funds through a longevity swap with Scottish Widows, a spokesman said.
The deal, which was reinsured by Pacific Life Re Ltd., covers the liabilities of Lloyds Bank Pension Scheme No. 1, Lloyds Bank Pension Scheme No. 2 and HBOS Final Salary Pension Schemes, which jointly have £40 billion in assets.
Lloyds Banking Group has not previously undertaken any risk transfer deals, the spokesman said. "We chose the longevity swap market instead of bulk annuities because it better suits the large size of our schemes," the spokesman added.
"We are delighted to have successfully completed these longevity insurance and reinsurance arrangements with Scottish Widows and Pacific Life Re. This will protect the schemes from the financial risk of an unexpected increase in life expectancy and make the schemes more secure to the benefit of all members," said Harry Baines, chair of the trustee, in a news release.
Willis Towers Watson advised Lloyds on the transaction, while law firm Allen & Overy provided legal advice.
Scottish Widows was advised by law firm Eversheds Sutherland, and CMS Cameron Mckenna Nabarro Olswang provided legal counsel to Pacific Life Re.
The transaction follows another plan sponsor's longevity swap deal in August. HSBC Bank U.K. Pension Scheme, London, insured £7 billion in liabilities through a longevity swap backed by the Prudential Insurance Co. of America.