13 August 2014

Guernsey hosts a “ground-breaking” captive insurance transaction for major pension scheme

Carey Olsen has advised the BT Pension Scheme trustees on the establishment of the largest ever Guernsey insurance captive designed to cover 25% of the scheme’s exposure to the risk of 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.

Carey Olsen partner, Konrad Friedlaender, senior associate, James Stockwell and associate, Paula Fry, advised the BT Pension Scheme trustees on all the Guernsey legal and regulatory issues with establishing the captive and the insurance and reinsurance transaction.  Ogier advised PICA in Guernsey. Carey Olsen worked with Allen & Overy as lead counsel on the insurance and reinsurance issues.

Advocate 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.”