The Canada Life Assurance Company and Canadian Bank Note Company Ltd (CBN)—a security printing company tasked with supplying the Bank of Canada with the nation’s banknotes—have jointly announced an agreement today that would see the transfer of $35 million of longevity risk associated with over 200 pensioners from CBN to Canada Life.
Through the agreement, CBN “maintains full responsibility for the payment of monthly pensions to its pensioners, but [Canada Life] will reimburse the pension plan should pensioners exceed life expectancy,” a release said.
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Global consulting leader
Mercer provided CBN advice on the agreement.
“Canadian Bank Note is invested in the future of our employees, and we are continuously evaluating the risks associated with our pension plans to ensure their long-term viability,” CBN chairman Douglas Arends said. “This innovative agreement with Canada Life protects our company and our employees against the rising costs associated with increased longevity.”
“This is an exciting development since the industry has not really seen many transactions done on this scale,” commented Canada Life vice-president of Pension Risk Transfer Neil Duffy. “Globally, through our reinsurance division, we have continually demonstrated our ability to write innovative longevity transactions, with one of our recent transactions being as large as €6 billion. When Canadian Bank Note approached us to help solve their longevity risk concern, it gave us the opportunity to build on our ability to innovate by developing a streamlined longevity insurance contract tailored to their needs as a smaller pension plan, opening doors for transactions of all sizes.”
“Plan sponsors are becoming more focused than ever on understanding and managing non-core business risks,” added Mercer Canadian Financial Strategy Group leader Manuel Monteiro. “With continuous improvements in life expectancy, which affects pension plans of all sizes, we expect there will be further developments in the market with more longevity related insurance transactions by organizations, both large and small across Canada.”
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