Guernsey is providing a captive-based solution that will offer an alternative method to manage defined benefit pension scheme risks.
It has been predicted that up to 40 FTSE 100 companies will have opted for full pension buyouts by 2028, however, a limited number have offloaded their schemes in full to insurers, with the buyout volume of FTSE 100 companies’ pension plans only totalling £5 billion out of almost £800 billion in liabilities.
Mike Johns, director of Willis Towers Watson Guernsey, noted that Guernsey’s captive-based solutions provide an alternative to buy-ins/outs.
He explained: “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.”
“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.”
These longevity shifts include both British Airways and Marsh & McLennan Companies in 2017, the Merchant Navy in 2015, and BT in 2014.
Artex Risk Solutions client services director Eddie Ballard said that Guernsey’s pedigree in pensions began in longevity de risking due to it being increasingly affordable and providing access to the reinsurance market.
He continued: “Guernsey provides a flexible, responsive regulatory regime outside of the EU.”
“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.”
Dominic Wheatley, Guernsey Finance chief executive, added: “While pension trustees and their advisers have been focusing on longevity risk in recent years, a captive insurance company can do far more.”
“There is a great appetite for reinsurance as it is a suitable solution for many types of risk.”
Guernsey’s pension solutions will be discussed at an event in London on 21 March 2019.
