Longevity deals to up UK pensions risk mkt-insurer

LONDON Aug 5 (Reuters) - The UK market for transferring pension risk should pass 10 billion pounds ($16.94 billion) this year, thanks to the use of longevity hedges to insure against pensioners living longer than expected, a specialist firm said on Wednesday.

Pension Corporation estimates longevity risk transfers will account for up to 60 percent of assets in the market by year-end, in contrast with 2008 where the focus was on full pension insurance buyout or buy-in deals.

Over the past few years, UK corporates have sought to de-risk their pension schemes through pension buyouts, whereby insurers take assets and liabilities off a company's books and commit to pay future pensions for a fee. Buy-in deals do much the same but keep pensioners tied to their existing scheme. Longevity deals via insurance contracts or swaps allow companies to hedge out the risk of retired workers living longer and reduce the burden on the company pension scheme.

In May, British engineer Babcock International (BAB.L) struck a deal with Credit Suisse (CSGN.VX) as the counterparty to hedge 500 million pounds worth of longevity liabilities [ID:nLB600429] [ID:nLD830765].

"What we are seeing with the larger pension schemes is that they are having to write many billion of extra pounds onto their books because of increasing longevity," Pension Corporation CEO Edmund Truell told Reuters.

"These funds are now seeking insurance against this risk - taking risk off the pension funds and pushing it into the insurance sector."

The company also launched a Pension Risk Transfer Index which measures pension assets and liabilities to calculate the cost of a full or partial buyout. ($1=.5903 Pound) (Reporting by Raji Menon; editing by Simon Jessop)