Partnership doubles book with largest enhanced buy-in

An unnamed UK pension scheme has completed the largest medically underwritten buy-in to date, covering half of liabilities through the £22m (€26m) transaction.

The de-risking deal, agreed with Partnership for a client of consultancy Hymans Robertson, sees the provider nearly double the value of its bulk annuity business to £35m.

Trustees of the scheme sought to reduce the concentration of risk, as the £22m transaction covered 20 members despite accounting for half of all liabilities.  

James Mullins, head of buyout solutions at Hymans Robertson, noted that the deal was “by far the largest” medically underwritten buy-in the UK market had seen to date, and that he expected demand to grow as competitive pricing drove interest.

“For trustees and sponsoring employers understandably concerned about their concentration of risk, an enhanced buy-in is a tailored and cost-effective way of managing their scheme’s liabilities,” he said.

Mullins’s colleague and the unnamed scheme’s actuary Alistair Russell-Smith added: “The trustees of the scheme looked at a range of de-risking opportunities and went for this solution because of its focus on the high-liability individuals – it has hedged around 50% of the pensioner liabilities despite only covering around 20 lives.”

David Harvey, head of de-risking at Partnership, noted that the deal proved that the medically underwritten approach – previously thought to be difficult for smaller schemes due to the requirement that all affected members fill in detailed medical surveys – could be part of the de-risking approach of schemes regardless of size.

The unnamed scheme received legal advice from Squire Sanders.

In other de-risking news, Pension Insurance Corporation (PIC) has completed a buy-in covering some of the pensioners in the TI Group Pension Scheme, sponsored by technology firm Smiths Group.

The £170m deal brings the level of insured liabilities in the scheme up to £800m.

Aon Hewitt’s Paul Belok, a partner who advised the scheme on the deal, praised the trustee’s approach as “measured and sensible” for insuring the scheme in tranches as and when market conditions allowed.