L&G sets sights on small DB schemes for de-risking

Legal & Generals DB de-risking business is targeting schemes with pensioner liabilities as low as £50m with longevity insurance.

To date named life longevity insurance has only been made available to schemes with pensioner liabilities over £1bn. L&G says it has identified an increasing need for smaller schemes to also reduce their longevity risk. The insurer argues that smaller pension schemes are generally exposed to greater mortality risk than larger schemes due to the fact that the impact of any fluctuations in longevity are felt more keenly in a smaller population. In addition, because of their size, the smaller schemes have less data on which to base their expectations for future mortality, it says.

Tom Ground, head of business development for Legal & General pension scheme insurance solutions, says: “Longevity insurance for larger schemes has to date been collateralised and largely or fully reinsured at the point the transaction is written. This means that the implementation of longevity insurance arrangement can be a complicated and time consuming process.”

So for smaller pension schemes, we have substantially simplified the process for them. We’ve been able to do this by leveraging the 25 years’ experience we have in the de-risking market to price and manage the longevity risk for the scheme in-house, and then arrange reinsurance at a later date, if required. By taking the reinsurance aspect out of the equation at the initial stage, we are able to make arranging longevity risk for smaller schemes easier, speedier and much more attractive.”