An innovative captive assisted value share bulk purchase annuity transaction via a Guernsey captive has been hailed as a ‘significant de-risking milestone.’
Global investment manager M&G has completed a £500m transaction with a private corporate sponsor and its UK pension scheme, insuring 3,200 pensioners and deferred members. The transaction marks the first ever bulk purchase annuity transaction that shares value with the sponsor.
M&G’s wholly owned subsidiary, The Prudential Assurance Company (PAC), used a Guernsey captive reinsurer to participate in the buy-in transaction. The captive reinsures a portion of PAC's exposure, thereby enabling the sponsor to participate in both the upside and the downside of the buy-in transaction.
This structure allows trustees to insure the scheme members in the same way as a traditional buy-in transaction while also allowing corporate sponsors to participate in the risk and reward generated from insuring their well-funded UK pension schemes.
The captive reinsurer is managed by SRS Management Guernsey Limited.
The transaction was advised by Carey Olsen’s corporate team comprising Partner Christopher Anderson, and Senior Associates Arya Hashemi and Vaishali Gupta.
Christopher Anderson said: "Guernsey is well established as Europe's leading domicile for captive insurance and highly regarded internationally for its proportionate, risk-based regulatory regime. We are delighted to have advised on this transaction – particularly as it is the first of its kind in the UK."
PwC advised the corporate sponsor on the buy-in and captive implementation and CMS provided legal advice to the sponsor. The trustees were advised by Mercer and Macfarlanes, and Eversheds provided legal advice to M&G.
