PIC bags largest ever pension risk transfer
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Insurance company RSA’s two pension schemes, totalling £6.5bn of liabilities and covering the pensions of 40,000 members, have been bought in with Pension Insurance Corporation, in the largest ever bulk annuity transaction.
The deal was priced during the gilts crisis last year. PIC said the improvement in pension scheme funding levels due to rising gilt yields created an opportunity for the sponsor to accelerate the schemes’ derisking, as well as derisk its own balance sheet, and for the trustees to enhance member security.
“The current market environment provides an excellent opportunity to remove UK pension exposure on IFC’s balance sheet and maintain the security of the benefits of 40,000 RSA UK pension scheme members," said Louis Marcotte, executive vice president and chief financial officer at scheme sponsor Intact.
The deal was priced during the gilts crisis last year. PIC said the improvement in pension scheme funding levels due to rising gilt yields created an opportunity for the sponsor to accelerate the schemes’ derisking, as well as derisk its own balance sheet, and for the trustees to enhance member security.
“The current market environment provides an excellent opportunity to remove UK pension exposure on IFC’s balance sheet and maintain the security of the benefits of 40,000 RSA UK pension scheme members," said Louis Marcotte, executive vice president and chief financial officer at scheme sponsor Intact.
Ray Cox, chair of Sal Pension Scheme, and David Smith, who chairs Royal Insurance Group Pension Scheme, said in a joint statement: “We are delighted to have completed this transaction, securing the pensions for members of both Schemes for the long term. PIC were flexible in their approach, presenting innovative solutions to previously intractable problems, as well as proactively addressing issues which might have derailed the process.”
Uzma Nazir, head of origination structuring at PIC, said: “We are proud to have completed an extremely complex bulk annuity deal, the largest pension scheme to insurer transaction the market has yet seen. From pricing during the unprecedented volatility of the LDI crisis in the autumn of last year to structuring the buy-in to address the issue of asset suitability, this transaction overcame many of the hurdles that very large pension schemes face as they accelerate their de-risking plans in light of rising gilt yields."
PIC’s in-house legal team, who worked on all legal aspects of the transaction for PIC, were advised by CMS Cameron McKenna. LCP advised RSA and Intact on all aspects of the buy-in process, while Slaughter and May provided legal advice. Aon and Sackers advised the trustees of SALPS, and WTW and DLA Piper advised the trustee of RIGPS. Penfida provided covenant advice to both trustee boards.
