Longevity swaps

The longevity swap market appeared to dry up in 2012, as new business dropped by more than two-thirds, according to data from Legal and General.

BAE Systems has agreed a £3.2bn longevity swap to cover 31,000 pensioners, in the UK's largest pensions insurance transaction.

The LV= Employee Pension Scheme has entered into an £800m longevity swap with Swiss Re to hedge the longevity risk associated with more than 5,000 members.

Axa Investment Management has urged the Financial Services Authority to strengthen LIBOR standards rather than scrapping the rate altogether and risk damaging pension schemes.

A liquid capital market in longevity risk must be created to ensure there is sufficient capacity to meet demand from schemes, argues Swiss Re.

The volume of bulk annuity business written in the first quarter of the year dropped by 85% compared to the final quarter of 2011, says Aon Hewitt.

The Akzo Nobel (CPS) Pension Scheme has agreed a £1.4bn transaction with Swiss Re to hedge the longevity risk for 17,000 pensioner members in the first longevity swap announced this year.

More than £12bn of scheme risk was transferred to insurers last year after a small number of huge deals in the final quarter gave the market a significant boost, says Aon Hewitt.

Babcock International saw its pension deficit rise by £40m to £266m over the year to the end of March, driven principally by a fall in discount rate applied to liabilities.

Sky high gilt prices at the start of 2012 have increased the attractiveness of bulk annuities for schemes holding gilts, a survey says.