Barnett Waddingham’s specialist insurance actuarial practice has launched a new service aimed at pension scheme trustees and sponsoring employers considering the transfer of liabilities to an insurance company as part of a buy-in or buy-out transaction.
The new service helps trustees and employers to understand the complex regime within which insurance providers operate, providing the relevant information in an easy to understand format – including an explanation of the insurer’s structure, solvency position, credit rating, investment policy and the key risks in its business model.
The bulk annuity market has developed significantly in the last five years, and insurance providers differ both with respect to business models and strategy as well as their experience in the market. Barnett Waddingham has found that many trustees and employers are not clear on the key criteria they should consider in assessing their chosen counterparty.
Commenting on the launch, Kim Durniat, head of Life Insurance at Barnett Waddingham, said: “We have already carried out a large number of insurer reviews for Barnett Waddingham pension scheme clients, as trustees often find the operations of insurance companies complex and difficult to interpret.
“In the past a strong reliance was placed on the assumed financial strength of large well known institutions, but the global financial crisis undermined this confidence and has emphasised the importance of understanding the risks that insurers are exposed to and how they are managed. In addition, the new entrants to the market are often unknown to the trustees and employer before they start the buy-in or buy-out process. A transaction will remove certain risks such as longevity, investment and inflation, but will introduce a host of new risks associated with the reliance placed on the insurer’s ongoing financial strength and working practices. Coupled with this is the increasing emphasis on trustees’ governance duties and, in particular, understanding what they are investing in. Our expertise enables us to provide this explanation to the trustees and, in particular, highlight the important issues to concentrate on.’’
Further details of the new financial strength review service can be found here.
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