L&G says the cover is the largest arrangement completed in the UK. The arrangement insures the plan against the financial risk of its 31,000 current pensioners living longer than expected, covering a total of Â£2.7bn of liabilities as measured by the plan, or Â£3.2bn discounted at Libor.
The pensioners of the plan will see no changes to its administration. L&G says the transaction demonstrates the increasing appetite of pension schemes and their sponsors for insuring longevity risk, as well as its capability in this developing market.
L&G will retain 30% of the longevity risk, with the remainder being reinsured by Hannover Re. BAE Systems group pensions director Nigel Tinsley said: "We are pleased to have worked with Legal & General and Aon Hewitt to develop this innovative approach to managing risk exposure within the BAE Systems 2000 Pension Plan.
"This arrangement offers us a flexible approach to managing the key risk of longevity in the Plan. We are particularly pleased that we were able to complete the process in a structured and straightforward fashion within six months."
Head of Legal & General's insurance de-risking solutions for pension schemes, Tom Ground, said: "Legal & General is delighted to have been selected by the Trustee of the BAE Systems 2000 Pension Plan for this important transaction.
"Legal & General's strength in this market is founded on many years of experience offering de-risking solutions to pension schemes. This strength is enhanced by our ability to implement a transaction of this nature with as few as one reinsurer counterparty, which allows our clients to achieve optimum value and swift execution of the transaction."
At 8:39am: [LON:LGEN] Legal & General share price was -1.6p at 155p
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