Pension Insurance Corporation in buyout agreement with Honda

by Artemis on January 31, 2011

Pension Insurance Corporation has announced that it has entered into a pension scheme buyout agreement with trustees of the Honda Group UK Pension Scheme to insure the £7m Honda Racing Development portion of the pension scheme. This effectively transfers the liability for the portion of the Honda scheme to Pension Insurance Corporation (PIC).

This is the latest in a number of pension risk transfer deals conducted by PIC in the last few years. They have entered into a number of buyout agreements in recent months, and also, as we reported recently, reinsured a £500m chunk of the longevity risk that they carry.

As more buyout agreements are conducted the longevity risk associated with the pension scheme liabilities is transferred to the counterparty, this means that these counterparties (such as PIC) will be seeking to transfer the longevity risk off their balance sheets in some way. This is where the capital markets and reinsurers can step in and arrange longevity risk transfer approaches such as longevity swaps and longevity linked catastrophe bonds (like Swiss Re’s recent Kortis Capital deal).

With so many pension schemes looking to de-risk themselves we expect to see growth in the longevity risk transfer and pension risk transfer markets this year.

The full press release from Pension Insurance Corporation is available here.

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