The trustee of the Merchant Navy Ratings Pension Fund (MNRPF) has agreed a £450m longevity swap with Metropolitan Life Insurance Company (MetLife).

The deal provides long-term protection to MNRPF against costs resulting from pensioners or their dependants living longer than expected, as well as enhancing security for MNRPF members.

The insurance policy, which will form a part of MNRPF’s investment portfolio going forward, was structured as an insurance contract with a captive insurer, owned by MNRPF's trustee and managed by WTW Guernsey, and onwards reinsurance to MetLife.

WTW acted as lead adviser to the trustee, with Linklaters as legal adviser and Carey Olsen providing additional advice to the trustee. Eversheds Sutherland, meanwhile, provided legal advice to MetLife.

MNRPF trustee, Melanie Cusack, highlighted the deal as a "positive step" in providing both additional security for members’ pensions and certainty for employers.

“I am delighted that the trustee has taken an important step to ensure that our members’ benefits are strongly secured against increases in life expectancy," she stated.

"This is a continuation of our de-risking journey, and we are pleased to have completed the deal with attractive economics."

MetLife head of risk solutions, Jay Wang, added: “MetLife’s long history and expertise in risk management positions us well to offer greater certainty for MNRPF in relation to its longevity risk.

"We are pleased to have been selected for the reinsurance of this transaction, this transaction demonstrates MetLife’s commitment to supporting solutions which help pension schemes and insurers manage longevity risk.”

WTW managing director and lead adviser to the trustee, Shelly Beard, also highlighted the deal as demonstration that longevity swaps are an option for smaller tranches of liabilities.

“We worked with the trustee to achieve a competitive reinsurer selection process and attractive economics relative to the fund’s reserves.

"It was a pleasure to work with MetLife to agree a transaction that met their, and the trustee’s, objectives, and to ensure that the trustee’s future flexibility is maximised.”

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