HSBC completes pension longevity swap transaction worth £7 billion


Banking organisation HSBC has completed a longevity swap transaction with The Prudential Insurance Company of America (PICA), to insure approximately £7 billion worth of pensioner liabilities.

The transaction, which is the second largest deal of its kind confirmed for a UK pension scheme, has been designed to manage the longevity risks associated with around £7 billion worth of pensioner liabilities within the HSBC Bank (UK) Pension Scheme; this involves providing long-term protection for the pension scheme against the potential costs of pensioners or their dependents living longer than expected, as well as enhancing security for the scheme’s members.

Forming part of the pension scheme’s investment portfolio, the insurance policy will cover half of the available pensioner liabilities and be structured as an insurance contract, with an HSBC-owned captive insurer in Bermuda and onwards reinsurance to PICA, which is a subsidiary of Prudential Financial (PFI).

The trustee of the HSBC Bank (UK) Pension Scheme was advised by Willis Towers Watson, Sackers, Kramer Levin Naftalis and Frankel and Appleby. HSBC in Bermuda was advised by Allen and Overy, Aon and Appleby, while PICA received advice from Willkie Farr and Gallagher and ASW Law.

Russell Picot, chair of the HSBC Bank (UK) Pension Scheme, 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.”

Amy Kessler, head of longevity risk transfer at PFI, added: “PICA is delighted to support the trustee in transferring longevity risk through this transaction, covering £7 billion of HSBC pensioner liabilities.

“As the global growth accelerates in pension de-risking, our team remains fully committed to providing solutions which help pension schemes and insurers manage longevity risk using innovative structures tailored to meet their specific needs.”