The Office of the Superintendent of Financial Institutions (OSFI) has issued a draft policy advisory that provides information and guidance to administrators of federally regulated pension plans considering entering into a longevity insurance or longevity swap contract.
The policy advisory applies to ongoing pension plans and describes the following:
- the broad types of longevity risk hedging contracts that exist;
- the risks to pension plans associated with these types of longevity hedges;
- considerations for plan administrators that are contemplating entering into a longevity risk hedging contract as a way of reducing their pension plan’s exposure to longevity risk; and
- OSFI’s expectations for plan administrators that choose to enter into a longevity risk hedging contract.
OSFI says that it wouldn’t object to a pension plan administrator entering into a longevity risk hedging contract “provided that the investment is permissible under the terms of the pension plan and the plan’s statement of investment policies and procedures, that it complies with the Pension Benefits Standards Act and the regulations and that the administrator exercises proper due diligence.”
Comments on the draft policy advisory are due by Dec. 6, 2013.
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