‘Island has answers to UK pension challenges’
A GUERNSEY captive-based solution provides a means by which defined benefit pension scheme deficits can be managed, experts have said.
While many predict that up to 40 FTSE 100 companies will have opted for full pension buy-outs by 2028, few have offloaded their schemes in full to insurers. The total buy-out volume of FTSE 100 companies’ pensions plans amounts for £5bn out of nearly £800bn in liabilities.
Willis Towers Watson Guernsey director Mike Johns said Guernsey’s solutions provide an alternative to buy-ins/outs.
‘A Guernsey captive-based solution puts greater operational oversight and control in the hands of pensions trustees and their advisers than any other, while allowing the scheme to retain investment risk,’ he said.
‘Guernsey is the only proven centre for captive-based longevity risk solutions. All recent captive-based pension longevity swaps have chosen the island as a domicile for the special purpose insurer.’
Those longevity swaps include British Airways, Marsh & McLennan Companies in 2017, the Merchant Navy in 2015 and BT in 2014.
Guernsey’s pedigree in pensions began in longevity de-risking due to it being increasingly affordable and providing access to the reinsurance market, according to Artex Risk Solutions Client Services director Eddie Ballard.
‘Guernsey provides a flexible, responsive regulatory regime outside of the EU,’ he said.
‘Its regime distinguishes between different classes of insurer, between commercial and captive insurers for example, and applies the regulatory regime to each in a proportionate manner.
‘This allows captive owners to gain a direct relationship with the reinsurance market in an increasingly time and cost-efficient manner.’
‘While pension trustees and their advisers have been focusing on longevity risk in recent years, a captive insurance company can do far more,’ said Dominic Wheatley, chief executive of industry promotional agency Guernsey Finance. ‘There is a great appetite for reinsurance as it is a suitable solution for many types of risk.
‘This is another example of how Guernsey delivers real-world solutions to real-world problems, in this case delivering greater reliability to the long-term financial wellbeing of millions of pension fund members in communities throughout the UK.’
n Guernsey’s solutions will be discussed during a briefing event at the Montcalm Royal London House in Finsbury Square, London, on Thursday 21 March.
A technical showcase will be followed by a drinks reception. For information about attending, visit the event microsite: https://www.weareguernsey.com/finance-events/2019/pensions-de-risking-briefing-session/.
