The Prudential Insurance Company of America (PICA), a subsidiary of Prudential Financial, Inc., has completed a longevity swap transaction with the HSBC Bank (UK) Pension Scheme.

The longevity swap is the second largest transaction ever completed for a UK pension scheme, and concerns the longevity risk in relation to c£7 billion of pensioner liabilities.

The new longevity insurance policy forms part of the Pension Scheme’s investment portfolio and is structured as an insurance contract with a HSBC-owned captive insurer in Bermuda, and onwards reinsurance to PICA.

Chair of the HSBC Bank (UK) Pension Scheme, Russell Picot, said: “I am delighted that the Trustee has taken an important step to ensure that our members’ benefits are strongly secured against improvements in life expectancy.

This is a continuation of our de-risking journey and we are pleased to have completed the deal at attractive pricing and working in partnership with our sponsor. This is a positive step in providing additional security of members’ pensions.” HSBC notes that the longevity arrangement provides the Scheme with long-term protection against costs resulting from pensioners or their dependents living longer that expected, while enhancing security for members of the Scheme, covering half of the pensioner liabilities.

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