Longevity hedging insurance policy launched for DB schemes

The specialist longevity insurer said the product – Longevity Risk Manager – pools the longevity risk of pension schemes and offers trustees and finance directors an alternative to buyouts or buy-ins.

LRM is a group policy bought by the scheme trustees on the lives of selected high liability members. At the outset the trustees pay a regular premium to Life Trust while an individual remains alive.

If the member then survives beyond a specified age the LRM makes payments to the scheme.

Life Trust chief executive Andy Briscoe said: "The two traditional methods of dealing with longevity risk, buyouts and buy-ins, are simply untenable for many schemes because they involve prohibitive capital expenditure.

"We believe that the LRM provides a genuine alternative to these options, while at the same time protecting capital and allowing trustees to retain full control of their schemes."

Life Trust head of strategy Mike Tyler added more than 5000 small and medium-sized schemes are likely to be experiencing this type of "idiosyncratic risk".