IMI insures deferred members in final buy-in
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The IMI 2014 Deferred Fund has insured a sixth tranche of liabilities worth £175m for 1,378 scheme members in a partial buy-in. The IMI fund is now fully insured.
The deal was picked up by Pension Insurance Corporation, which has secured a total of £1bn of the UK engineering firm’s pension liabilities since 2016 in six partial buy-ins.
Greg Croydon, who chairs the trustee board, said the transaction was the result of the scheme’s long-term derisking journey to insure the fund’s obligations.
“We have now insured the benefits for all our members,” he added.
Tristan Walker-Buckton, head of pricing at PIC, said a key aspect of the transaction was the very high proportion – 97% – of deferred members.
How the scheme’s illiquid assets were dealt with was another important part of the deal.
“We were able to offer a solution for the fund’s illiquid assets by providing flexibility in the payment structure, enabling the trustees to transact when they wanted to rather than waiting to sell down their remaining illiquid assets,” he said.
The joint working group between the fund and IMI plc was advised by PwC. The scheme also had actuarial advice from WTW, investment advice from Aon and legal input from Squire Patton Boggs.
In July, PIC secured a £52m buy-in deal with the trustee of the Medway Packaging Pension scheme, and in February last year, it said it had signed a £400m buy-in with the Merchant Navy Officers Pension Fund, having insured £1.6bn of the fund’s liabilities two years earlier.
The risk transfer market is expected to boom this year, as rising gilt yields have helped many schemes achieve full funding much sooner than expected. Consultancy LCP says rates moves resulted in an average 15% improvement in the buyout funding positions of DB schemes over 2022, accelerating the time to buy-in or buyout by five years on average. The firm therefore predicts buy-ins and buyouts to top 2019’s £43.8bn record this year.
How much capacity is in the insurance market to absorb the queue of DB schemes looking to derisk?
