UPDATE 2-UK's Aviva offloads pension fund longevity risk in record deal

Thu Mar 6, 2014 12:35pm EST
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* 5 bln stg longevity swap is largest ever

* Brings total issuance to 30.1 bln stg

By Jemima Kelly

LONDON, March 6 (Reuters) - British insurer Aviva has agreed to transfer the risk of members of its staff pension scheme living longer than expected to three reinsurers for 5 billion pounds ($8.4 billion) in the largest deal of its kind.

Aviva's transaction by itself represents more than half of the total 8.9 billion pounds of longevity swaps in 2013 and is substantially larger than the previous 3.2 billion pound record set by BAE Systems last year.

Longevity swaps, which involve a final-salary pension scheme hiving off the risk that it will have to pay pensioners for longer than expected, have become a growing market because statisticians have consistently underestimated life expectancy.

Aviva told Reuters on Thursday that the deal was agreed with Swiss Re, Munich Re and SCOR.

The swap is the first of 2014 and lifts total issuance since the first deal in 2009 by 20 percent to 30.1 billion pounds.

"The trustee is delighted to have taken another important step in our ongoing process to improve further the level of security of all our members' benefits," Ian Prosser, chair of trustees for the Aviva Staff Pensions Scheme, said in a statement.   Continued...