Legal & General (L&G) has secured a £230 million ($325 million) medically underwritten bulk annuity deal with the Kingfisher Pension Scheme, the largest deal of its kind in the UK.
Medical underwriting involves gathering data on individual members’ health, which “allows the insurer to form a more robust view on life expectancy and to price the risk with more certainty,” L&G said in a statement.
The insurer employed “several innovative features” for the transaction, it said. These included “top slicing”—targeting a small number of members that account for a disproportionate part of the fund’s liabilities—and pricing linked to a basket of government bonds.
“We believe the growth in the top slicing approach is set to continue and, for many schemes, will be the first step on a journey to full buyout,” said Cheryl Agius, head of strategic business for pension risk transfer at Legal & General. “Medically underwritten bulk annuities were traditionally viewed as a solution for smaller schemes, and the emergence of top slicing helps open up medical underwriting to medium and larger schemes as well.”
The transaction secures benefits for 149 members of the £3.1 billion pension for former employees of the UK home improvement retailer.
The buy-in was “another important step” towards the pension fund’s goal of self-sufficiency by 2030, said Clive Gilchrist, independent trustee and chair of the Kingfisher Pension Scheme trustee board.
Late last year L&G entered the Dutch de-risking market for the first time, re-insuring €200 million from ASR Nederland. The group has also been shortlisted in CIO’s forthcoming European Innovation Awards.
Related: L&G Dives into Dutch De-Risking & L&G America Takes on PRT Market