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The Actuary The magazine of the Institute & Faculty of Actuaries

Longevity swap placed by Aviva and Partner Re

Norwich Union, PartnerRe and RBS have announced the successful placing of a longevity swap in which the risk of UK annuitants living longer has been transferred to the capital markets for the benefit of Norwich Union (NU). The transaction has enabled NU to transfer the longevity risk on a £475m book of older UK annuitants until 2018. It was placed with a range of capital market investors despite difficult market conditions and brings new capacity for longevity risk.

Under International Financial Reporting Standards and Market Consistent Embedded Value, the transaction is immediately accretive for NU and also releases capital. RBS acted as arranger and bookrunner for the transaction. PartnerRe, in addition to being the lead investor in the deal, provided input into the pricing for the underlying longevity risk.

Gianfranco Simionato of RBS Credit and Insurance Risk Transformation said: “The success of the transaction demonstrates that, even in a tough market environment, longevity risk represents an attractive exposure for capital market participants.”