Guernsey Highlights Captive Solution to Pension Scheme Risks

Guernsey provides a captive-based solution as an alternative to full pension buy-in/outs as a means to manage defined benefit pension scheme deficits.

We Are Guernsey said it has been predicted that up to 40 Financial Times Stock Exchange (FTSE) 100 companies will have opted for full pension buyouts by 2028. Few of these companies have offloaded their schemes in full to insurers, with the total buyout volume of FTSE 100 company pensions plans comprising only £5 billion out of nearly £800 billion in liabilities.

Willis Towers Watson Guernsey Director Mike Johns said Guernsey's captive-based solutions provide an alternative to buy-ins/outs.

Mr. Johns continued, "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, "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 (both 2017), the Merchant Navy (2015), and BT (formerly British Telecom) (2014), according to We Are Guernsey.

Guernsey's history in pensions began with longevity derisking by providing affordable 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," Mr. Ballard 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."