Lloyds Banking Group Pensions Trustees Limited has entered into two new longevity insurance and reinsurance arrangements to further protect the Lloyds Banking Group pension schemes from the cost of unexpected increases in the life expectancy of its members. 

The new longevity insurance and reinsurance arrangements cover £2.1bn and £3.0bn of pensioner liabilities in the Lloyds Bank Pension Scheme No.2 Scheme and the HBOS Final Salary Pension Scheme respectively.  

Both transactions are structured as insurance policies with Rothesay Life as the insurer, with reinsurance provided by Pacific Life Re and an insurance subsidiary of US-based Prudential Financial for Lloyds No.2 and HBOS respectively.   

These latest transactions follow previous insurance and reinsurance arrangements that the trustee has entered into in 2020 (which covered £10bn of liabilities) and 2022 (which covered £5.5bn of liabilities) across the Lloyds Banking Group pension schemes.   

“We are pleased to have successfully completed these transactions which further reduce the Schemes’ exposure to longevity risk and make the Schemes more secure to the benefit of all members. The selection of Rothesay, Pacific Life Re and PFI followed a fair, robust and transparent review of the longevity insurance and reinsurance options available across the market,” said Vicky Paramour, Trustee Director and Chair of the Investment & Funding Committee. 

“The transactions with Pacific Life Re and PFI represent a further significant step in the Trustee’s strategy to reduce longevity risk and it has been a pleasure to advise the Trustee on this strategy over many years, including working closely with the Trustee and the team at A&O Shearman to negotiate the latest transactions. These transactions were completed with separate reinsurers in a very short space of time and demonstrates continued improvements in the efficiency of contracting in the longevity swap market, particularly for schemes that have previously completed longevity swaps,” said Matt Wiberg, WTW, lead adviser to the trustee. 

“We are delighted to have advised the Trustee on these transactions, and to have been able to continue helping the Trustee reduce longevity risk across the Lloyds’ schemes. These are significant transactions in what continues to be an active market for longevity de-risking by pension schemes,” added Philip Jarvis, A&O Shearman, legal adviser to the trustee.