Sun Life Financial and Canadian telecoms group Bell have entered into a record-breaking longevity swap deal worth C$5 billion (US$4 billion).
The insurer, the third-biggest in Canada, said in a statement that the agreement was “the first of its kind in North America.”
“This agreement is an innovative way to de-risk pension obligations by taking proactive measures to guard against longevity risk without the requirement for additional cash contributions,” said Siim Vanaselja, chief financial officer for Bell.
Although the terms of the deal were not made public, the insurance company’s statement said the Bell Canada Pension Plan would pay monthly premiums in exchange for Sun Life making payments into the fund for the lifetime of existing pensioners.
RGA Canada and SCOR Global Life are to act as reinsurers for “a portion” of the longevity risk, the statement said.
Pension-risk transfers are slowly gathering pace in Canada: Sun Life signed a $150 million buy-in deal with the Canadian Wheat Board in 2013, which was followed by $500 million de-risking deal in 2014 between an unnamed pension fund and, reportedly, insurer Industrial Alliance.
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