MMC U.K. Pension Fund, London, hedged £2 billion ($2.5 billion) in longevity risk through the first longevity swap to include active participants.
Mercer, a Marsh McLennan business and adviser to the pension fund, said in a news release that the deal covers around 14,500 retirees, deferred retirees and active participants. A spokesperson said the fund had £5.3 billion in assets as of Oct. 31.
The hedge was implemented via the "Mercer Marsh" longevity captive solution, using Guernsey-based incorporated cell company Mercer ICC, which is managed by Marsh Captive Solutions Guernsey.
The longevity risk was reinsured with Munich Re via a new incorporated cell, Fission Gamma IC, the release said.
The deal follows a £3.4 billion longevity swap completed in 2017 with Canada Life Reinsurance and Prudential Financial.
The pension fund has now removed almost all of its defined benefit longevity risk, the spokesperson added.
"We see this additional longevity hedge as a natural next step as we look to reduce risk within the fund," said Bruce Rigby, chair of the trustees, in the release.
"What is distinctive about this transaction is that longevity risk of active members is covered as well as over 75 percent of this longevity swap being comprised of nonpensioners, managing the long-term exposure of the fund to improvements in longevity," said Suthan Rajagopalan, lead transaction adviser for the trustees and head of longevity reinsurance at Mercer, in the same release.
