Munich Re completes longevity swap with Lafarge UK Pension Plan

Munich Re, the biggest reinsurer in the world, has completed a longevity swap with the Lafarge UK Pension Plan, which provides the plan with protection against the risks of participants living longer than expected.

Lafarge said the action followed a thorough market review in August 2018 which identified longevity risk as the largest individual risk in the plan.

"The length of time people are expected to live in retirement has increased significantly over several decades. These gains in life expectancy are good news but do increase the cost of providing pensions," the plan stated in its latest newsletter.

"It is not easy to predict future life expectancy accurately – current estimates of longevity may change in future and members may of course live longer than expected: this creates the longevity risk."

The plan said its long-term strategy is to be fully funded on the ‘buy-out’ basis, meaning that it would be in a position to purchase annuities from an insurance company, that would cover all the pensions promised to members.