PIC completes £1.6 billion buy-in with MNOPF

London, 10 February 2020 – Pension Insurance Corporation plc (“PIC”), a specialist insurer of defined benefit pension schemes, has completed an insurance deal with the Merchant Navy Officers Pension Fund (“MNOPF”), converting a pensioner longevity swap into a £1.6 billion buy-in

The buy-in secures the pensions of around 14,000 members and converts a longevity swap held between MNOPF and Pacific Life Re. This is the third such transaction involving the conversion of a longevity swap to a buy-in completed by PIC, signifying a growing appetite in the market for these types of deals. The Trustee was advised by Willis Towers Watson and legal advice was provided by Baker McKenzie. PIC was advised by CMS.

The MNOPF is an industry-wide pension scheme established in 1937 to allow shipping companies to provide retirement and death benefits for their officers. 

MNOPF Chair, Rory Murphy, said: “This buy-in enables us to more effectively manage the risks faced by the Fund as a whole, providing greater certainty to members that their benefits will continue to be paid in full from the Fund. It is also good news for employers in the maritime and shipping industry, who have already saved many millions in deficit contributions over recent years as a result of our improved funding position.

“There is also a positive message here for the wider pensions community. A well-run fund, with strong governance and expert advisers, can deliver valued and sustainable benefits to its members while successfully managing the risks and costs faced by its employers.”

Uzma Nazir, Head of Origination Structuring at PIC, said: “We are delighted that the MNOPF Trustee chose to work with PIC and ultimately secure this tranche of their members’ benefits with us. It takes expertise to complete a conversion of a longevity swap to a buy-in and all parties worked well together to get the Trustee’s desired goal. A great outcome for all.”

Andy Waring, CEO of the MNOPF, said: “Securing the benefits of our members has always been a significant part of the MNOPF Journey Plan. The buy-in with PIC is a great step forward to achieving this outcome. The Trustee pioneered the use of a ‘ready-made’ Guernsey captive cell for the purposes of longevity hedging back in 2014 – one of the reasons for this was our view that it would make a future novation to buy-in easier and more efficient, which has proved to be the case.”

Shelly Beard, Senior Director at Willis Towers Watson, said: “Novations of longevity swaps are becoming increasingly commonplace, and this one proved to be particularly quick and efficient because the 2014 longevity swap was structured through a Guernsey-based captive. It was great to partner with PIC, Pacific Life Re and the Trustee to implement another ground-breaking transaction at attractive pricing.” 

Hannah Stott, Longevity Director at Pacific Life Re said: “We’ve been working with MNOPF Trustee since the longevity hedge was written in 2014. We’re pleased to have  helped them on the next step of their de-risking journey by converting this longevity swap to a buy-in with PIC. Conversions of longevity swaps can be complex and the framework that we originally put in place has made this more efficient and shows that longevity swaps can be an effective first stage in de-risking”.

Notes to Editors:

For further information please contact:

Jeremy Apfel                         
+44 (0)20 7105 2140     
apfel@pensioncorporation.com