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Legal & General to make longevity insurance mainstream

02 August 2016

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Legal & General is joining forces with a specialist longevity information service to bring automated longevity insurance pricing to defined benefit (DB) pension schemes.

Club Vita, along with L&G, is launching VitaHedge - a service that automatically delivers tailored indicative pricing to schemes supporting Club Vita.

Douglas Anderson, founder of Club Vita, said there are good reasons to anticipate an upswing in longevity management deals: "With negative real yields on UK gilts, the impact of longevity risk – i.e. the cost of continuing to pay pensions when people live longer than expected - has risen by 50 per cent."

"This is in the context of the risk of yields staying low or getting lower increasing following the Brexit vote and comes at a time when schemes are maturing and reducing their exposure to investment risk."

Longevity risk now represents a larger slice of the risk pie than ever before, he added, which means it is inevitable that longevity risk management will move higher up the agenda for those running DB schemes.

Club Vita has invested heavily in technology to efficiently deliver detailed statistical analysis to each scheme to support their risk management programmes, such as benchmarking survival patterns against peers.

Anderson said: "VitaHedge is a natural extension of Club Vita's existing data services - until recently, insurers have only been confident to offer attractive prices to the biggest schemes, but that's now starting to change.

"We are proud to be opening up the benefits of longevity hedging to a wider audience of pension funds.

Phill Beach, head of core business for the L&G Pension Risk Transfer team, said the company has a history of delivery new and innovative pension risk transfer solution to pensions schemes.

He said: "Longevity insurance has an important role to play in pension de-risking journey plans and has historically been utilised by only the largest pension schemes and insurance companies in the UK.

"We believe VitaHedge will help smaller and medium sized pension scheme overcome the barriers they have historically faced."

First published 28.07.2016

Lindsay.sharman@wilmingtonplc.com