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BT longevity swap points way for pass-through structures
The record longevity swap announced by BT recently uses a structure that will only appeal to the largest pension schemes, say experts. However, elements of the deal might be picked up by others, particularly the idea of schemes taking on the counterparty risk of reinsurers
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BT's pension fund announced on July 4 a longevity swap equalling the entire volume of transactions last year, but – unusually – there was no bank or insurer as intermediary on the deal.
Instead, the BT scheme transacted directly with Prudential Insurance Company of America as reinsurer, setting up a wholly owned insurance vehicle in Guernsey to make doing so possible.
"By using a wholly owned insurer, the trustee was able to access capacity in the global insurance and reinsurance market directly
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