The Prudential Insurance Company of America (PICA) has concluded a longevity swap transaction with the HSBC Bank (UK) Pension Scheme.

Under the terms of the contract, PICA – a subsidiary of Prudential Financial – will manage longevity risk in relation to nearly £7bn of pensioner liabilities.

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This is said to be the second largest deal ever for a UK pension scheme.

The new longevity insurance policy forms part of the HSBC Bank (UK) Pension Scheme’s investment portfolio.

The transaction has been arranged as an insurance contract with a HSBC-owned captive insurer in Bermuda, and onwards reinsurance to PICA.

HSBC Bank (UK) Pension Scheme Chair Russell Picot said: “I am delighted that the Trustee has taken an important step to ensure that our members’ benefits are strongly secured against improvements in life expectancy.

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“This is a continuation of our de-risking journey and we are pleased to have completed the deal at attractive pricing and working in partnership with our sponsor.  This is a positive step in providing additional security of members’ pensions.”

The longevity arrangement, according to HSBC, provides the Scheme with long-term protection against costs resulting from pensioners or their dependents living longer, while improving security for members of the Scheme by covering half of the pensioner liabilities.

HSBC Bank UK chief risk officer James Calladine said: “This transaction marks another sensible and positive step on the Scheme’s de-risking journey, with terms that make financial sense for both the Trustee and for the Scheme’s sponsor.”