LONDON, 10 February 2015 - Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE:AON), has said that 2015 is likely to see yet more schemes approaching the longevity swap market, with significant reinsurance market funding offering more capacity, aided by increasingly streamlined deal structures and project timelines.
 
The latest deals have taken the total UK pension longevity swaps market to over £50billion from a standing start in mid-2009, but the market has been characterised by a relatively small number of very large deals.

Martin Bird, senior partner and head of risk settlement at Aon Hewitt said:
"The longevity swap market may well be perceived as having been rather stop-start.  But today, with over £50billion of risk successfully transferred to the reinsurance market, the outlook is very different.  The reinsurance market remains buoyant and is keen to capitalise on the investments made in terms of building capability and resource, in order to price, structure and execute deals. We see no shortage of capacity and can already see a deal flow of more than £20billion during 2015.

“As with any healthy market, innovation has been a key factor; for example, 2014 saw a major change in the approach to intermediation. In particular, at the larger end of the market, we saw a focus on the most efficient way to access large scale reinsurance capacity.  Both the Phoenix Group and Aviva deals made use of a sponsor owned insurer as the intermediary, and the BT Trustees set up their own insurance company in Guernsey to enable their deal.”

Martin Bird continued:
“Now in 2015, various middle ground solutions are coming on-stream very quickly, allowing pension schemes to have a more direct relationship with the reinsurance market to generate price savings, but without taking on the risks associated with a “self-intermediation” approach.

“Innovation is also happening at the smaller end of the market.  While there have been a number of ‘mega deals’, this may not be indicative of where the market is going next. After all, there are many more smaller-sized pension schemes looking to derisk and increase stability, so the significant interest for longevity risk from the reinsurance market is trickling down into that territory. Deals of around £50 million are being priced and analysed – a classic example of how smaller schemes can capitalise on the knowledge gained from the big deals.”

Media Contact:
Colin Mayes                                        Marina Jane Sanchez
Aon Hewitt                                           CNC
01372 733689                                       020 3219 8811
colin.mayes@aonhewitt.com                marina.jane-sanchez@cnc-communications.com

Notes to Editors

What is a longevity swap?
A longevity swap is a mechanism that allows a pension scheme to offload the risk of its members living longer than expected (longevity risk) to a third party, usually an insurance/reinsurance provider or an investment bank.

Under the arrangement of a longevity swap, a pension scheme commits to making regular payments to a third party based on agreed expected mortality rates. In return, that party undertakes to service the payments to scheme members based on actual mortality rates. The structure of longevity swaps is similar to that of interest and inflation swaps.

About Aon Hewitt
Aon Hewitt empowers organisations and individuals to secure a better future through innovative talent, retirement and health solutions. We advise, design and execute a wide range of solutions that enable clients to cultivate talent to drive organisational and personal performance and growth, navigate risk while providing new levels of financial security, and redefine health solutions for greater choice, affordability and wellness.  Aon Hewitt is the global leader in human resource solutions, with over 30,000 professionals in 90 countries serving more than 20,000 clients worldwide.  For more information on Aon Hewitt, please visit www.aonhewitt.com

 Follow Aon Hewitt on Twitter: https://twitter.com/AonHewittUK
Sign up for News Alerts: http://aon.mediaroom.com/index.php?s=58

About Aon
Aon plc (NYSE:AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 66,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world’s best broker, best insurance intermediary, best reinsurance intermediary, best captives manager, and best employee benefits consulting firm by multiple industry sources. Visit aon.com for more information on Aon and aon.com/manchesterunited to learn about Aon’s global partnership with Manchester United.