13 August 2014EMEA analysis

Guernsey captive established for BT pension scheme

British Telecom (BT) has opted to establish a captive in Guernsey that will provide 25 percent of the company pension scheme exposure to increased life expectancy.

The BT Pension Scheme is the UK's biggest corporate final salary scheme and the transaction is one of the largest ever established and covers scheme liabilities currently valued at around $16 billion. The longevity insurance and reinsurance transaction involved the Guernsey captive as insurer and the Prudential Insurance Company of America (PICA) as reinsurer, with law firm Carey Olsen acting as advisor.

Carey Olsen partner, Konrad Friedlaender said that in common with most providers of defined benefit pension arrangements, trustees endeavour to obtain certainty around the very substantial risks to the scheme and its funding of increasing life expectancy of members and their dependants.

“The BT Pension Scheme’s captive has reinsured the longevity risk with PICA in a scheme that is regarded as ‘ground-breaking in terms of size and structure’.

“Not only is this arrangement entirely unique and extremely high value, it also augers well for Guernsey as a jurisdiction in being able to attract this business and to service structures of this nature.”