Swiss Re to buy mortality risk via new pension services division

by Gill Montia

Story link: Swiss Re to buy mortality risk via new pension services division

Swiss Re is launching a new division in September that will specialise in pension services.

The business will acquire pension schemes and provide a range of other services, including an innovative mortality risk management service.

The new division will initially be promoted to UK and European companies with defined benefit plans worth at least £500 million.

It will be led by Richard Farr, the group’s head of global pensions.

Mr Farr believes that companies are increasingly reviewing the options for their pension schemes because of rising costs, an ageing population and volatile markets.

This year has seen a rise in pension buyouts, led by Paternoster, Legal & General and Aegon Trustee Solutions.

However, Swiss Re asserts that it is adding a unique service to the sector through the purchase of mortality risk from pension schemes.

The group will buy the risk and sell it on to hedge funds and other investors in short-term products, most likely in the form of a “mortality bond”.

Earlier this year, the Pensions Regulator told all UK pension providers they must use realistic life expectancy forecasts and introduced a new standard that assumes men retiring at 65 today will live to at least aged 89.

In 2007, the average 65-year-old British male had 19.7 years of life left and by 2027 this is expected to have increased to 21.5 years.