Gowling WLG's pensions team, led by director Christopher Stiles, has advised Pirelli on longevity swaps for two of its UK pension funds with Zurich Assurance Limited.
The team's initial advice considered whether longevity swaps, where the provider would insure the risk of covered members living longer than expected, were a feasible option for the funds. Gowling WLG's team moved on to providing thorough training for the trustees to ensure they were fully aware of what they were doing and investing in, what the hedges were designed to achieve, and the associated risks. Gowling WLG also led the contractual negotiations with Zurich on the trustees' behalf.
The swaps are noteworthy because they make use of a streamlined process which Mercer, the lead commercial advisers to the trustees, have been developing with the provider. In total, pension liabilities worth around £600 million have been hedged, meaning that the pension funds no longer carry the longevity risk of these pensioners.
Director Christopher Stiles said: "Longevity swaps first came to prominence in the pensions world in 2009, but until recently have only seen as options for the biggest schemes. These ones were interesting because they suggest that these swaps are becoming more commoditised and therefore available to medium-sized schemes also. They will not be the right solution for every scheme, but they are certainly an option which an increasing number of schemes can now consider."
Tony Goddard, pensions manager at Pirelli, added: "Gowling WLG conducted a thorough feasibility study, and then negotiated the contract to provide the best risk management possible within the parameters of a fairly standardised offering. We're really pleased with the outcome and the added security this provides for our members' pensions."
The core Gowling WLG team comprised Christopher Stiles, partner Paul Carberry, and associates Pete Miles and Felicity Rich. The team was also able to call upon invaluable support from specialist colleagues in its banking, finance and insurance teams.