Lloyds Banking Group pension in £5.5bn deal

French reinsurer SCOR has announced a £5.5 billion “longevity transaction” with Lloyds Banking Group Pensions Trustees.

Lloyds Banking Group (LBG) is the owner of Bank of Scotland, Scottish Widows and Halifax.

The transaction covers liabilities of over 17,000 members of the Lloyds Bank No. 1 Pension Scheme.

“The transaction protects the trustee of the scheme by transferring the risk that members live longer than expected …” said SCOR.

“The deal is structured as an insurance policy where Scottish Widows Limited, a subsidiary of Lloyds Banking Group, acts as an intermediary insurer while SCOR provides 100% reinsurance coverage.

“In return for a series of fixed premiums, SCOR agrees to meet claims based on the pensions actually paid to members of the scheme.

“Both SCOR and Scottish Widows were selected as providers after a full and robust selection process carried out by the Trustee.”

SCOR was advised by global law firm CMS and WTW was the adviser to the Trustee for the transaction.

SCOR CEO Laurent Rousseau said: “This is our largest longevity transaction to date.

“It reaffirms SCOR’s commitment to supporting pension scheme de-risking in the UK and globally.

“Recent world events such as the pandemic have underscored the uncertainty associated with life expectancy and the strategic necessity to provide adequate reinsurance solutions.

“We are pleased to provide protection and certainty to the Lloyds Bank pension members and broaden our Life & Health franchise.”

SCOR Head of Longevity Business Development Matt Collins said: “It was a great pleasure working with the Trustee and its advisors at WTW on such a milestone transaction for SCOR.

“The investment put in by the Trustee and WTW on previous transactions significantly helped make this a smooth and efficient process.

“I would like to thank all the parties who worked together with us for the successful completion of this significant transaction.”

Matt Wiberg, WTW, Advisor to the Trustee, observed: “It’s been a great pleasure to work with the Trustee again and I am delighted to have advised on their second material longevity transaction.

“The Trustee has now hedged over £15 billion of the schemes’ longevity risk providing greater certainty in relation to their long-term journeys.

“The infrastructure established by the first transaction in 2020 was crucial in running an efficient process that enabled the Trustee to benefit from a market opportunity to further reduce longevity risk in a cost-effective manner.”