Guernsey has seen a surge of pension longevity risk transfer deals over the past 18 months which has continued through COVID-19, according to Guernsey Finance.
In the last five years, a number of pension schemes have completed transactions, together worth in excess of £30 billion, through captive insurers based in Guernsey.
Three deals were conducted in 2020, with a combined scheme value of more than £8 billion along with more transactions in the pipeline.
All solutions offered through Guernsey use an incorporated cell of a Guernsey incorporated cell company (ICC).
In June 2020, Willis Pension Scheme entered into a longevity swap transaction with Munich Re to manage longevity risk concerning £1 billion of pensioner liabilities.
The longevity risk has been transferred to the reinsurer via a Guernsey-based captive insurance company fully owned by the Trustee of the Scheme, established under Willis Towers Watson (WTW) Guernsey ICC.
Commenting on the increased interest, Christopher Anderson, partner at Carey Olsen, who is based in Guernsey, notes: “The first deal we saw completed through Guernsey is still the biggest, for British Telecom in 2014 at a value of £16 billion.”
He continues: “This certainly opened eyes to the possibilities of pension longevity risk transfer in this way. It’s fair to say the market just ticked over for the next few years, but we have seen a lot of activity in the past 18 months with plenty more discussions in the pipeline.”
“Guernsey has a lot to offer this specific market, from our highly-regarded regulatory regime through to our long history in cell company and captive insurance innovation, which has, in turn, created a centre of excellence for handling these types of complex transactions,” he adds.
In December 2020, the Guernsey Financial Services Commission (GFSC) introduced a pilot scheme for pre-authorisation for insurance cells.
Robus Insurance protected cell company (PCC) had a captive cell pre-authorised for a client for their professional indemnity programme a few months later in March this year.
Robus used the GFSC pre-authorisation pilot scheme for cell captives.
