27 July 2020New Captive Models

Willis pension scheme uses a Guernsey captive to execute a longevity swap

The Willis pension scheme has executed a longevity swap through its Guernsey-based captive.

Munich Re is managing the longevity risk in relation to some £1 billion of Willis pensioner liabilities, covering pensions in payment and long-term protection for the scheme against longevity risk, involving some 3,500 scheme members.

The longevity risk was transferred to the reinsurer via a Guernsey-based captive that is fully owned by the trustee of the scheme, established under Willis Towers Watson Guernsey ICC (incorporated cell company).

Guernsey allows pension schemes to use a ‘ready-made’ ICC to access the reinsurance market, without the need for a third party insurance carrier to intermediate.

Ian Aley, head of transactions at Willis Towers Watson, and lead adviser, said: “The longevity swap market is currently very buoyant and represents an opportunity for pension schemes such as the Willis pension scheme to manage a material risk while retaining the flexibility to achieve the required investment returns to complete their journey plan.”

Jean-Pierre Bourgaize, account manager at Willis Towers Watson in Guernsey, added: “This is a great deal for Guernsey to be involved in, and great for Willis Towers Watson.”

Richard Sharp, partner at Bedell Cristin, which acted for Munich Re, said: "This is a really interesting period of development for our insurance sector. Guernsey is the clear leader in pension longevity and reinsurance structuring.”

Konrad Friedlaender, partner at Carey Olsen which advised the trustees of the Willis scheme, added: “The longevity swap transaction solution used here, utilising a Guernsey ICC, has become a well-trodden path in recent years because of the flexibility underpinning Guernsey's ICC legislation, and we expect to see further activity in this area in the near future."