Aon-HSBC devise Bermuda captive solution for £7bn longevity swap
Aon and HSBC have used an innovative captive solution to complete a £7 billion longevity swap, involving the HSBC Bank (UK) Pension Scheme and Prudential Insurance Company of America (PICA).
Aon advised HSBC in Bermuda on the structure which uses a captive solution with an HSBC-owned insurer in Bermuda. PICA then reinsurers the transaction, which relates to around half the scheme’s pensioner liabilities. Aon claims this is the second-largest ever deal of its type.
A multi-disciplinary team from Aon helped with the establishment and licensing of the new captive solution, together with advising on the operational infrastructure required to service the deal on an ongoing basis. The team included members of Aon’s UK based risk settlement group, led by senior partner Martin Bird, and Aon Insurance Managers (Bermuda), led by managing director Anup Seth.
Tom Scott, principal consultant in Aon’s Risk Settlement team, said: “This landmark transaction in which we supported HSBC in Bermuda represents another step forward in terms of innovation, with captive structures and other types of insurance structures now enabling even the very largest schemes to access the reinsurance market in an effective manner.”
Martin Bird, senior partner and head of risk settlement at Aon, said: “It is particularly pleasing that Aon was able to bring together all the necessary expertise to support this transaction. Working in the various offshore locations on this type of longevity deal requires a combination of both jurisdictional expertise and good working relationships - as well as the very longevity-specific expertise related to operational deal structuring.
“We continue to see very strong demand for pension scheme de-risking solutions, whether in bulk annuity or longevity-only formats – and 2019 remains on course to be another record-breaking year for this market.”