Leveraging opportunities for risk transfer clients

Our risk transfer team have completed a buy-in for a long-standing financial services client on an accelerated nine-month timeline to help them leverage a market opportunity, still ensuring thorough preparation to approach the market. It typically takes 12-24 months to prepare for and execute a buy-in transaction.

As well as ongoing actuarial and administration services, the services we provided for our client included buy-in preparation, insurer selection and transaction execution.

A timeline of events

Due to significant rises in gilt yields, improvements in estimated bulk annuity pricing and the gradual maturing of our client’s scheme, we expected a significant improvement in their solvency position. 

We quickly produced initial valuation results (within a matter of weeks from the valuation date) and presented them to our client and the sponsor – they were interested in a potential transaction opportunity to help them manage the long-term pension liability and risks. 

We provided training on bulk annuities and the transaction process to the trustees and sponsor, helping them to develop a market approach which would achieve their objectives. We prepared a high-level bulk annuity project plan within days of agreeing to explore the opportunity further.

We undertook a significant amount of data and benefit work across the actuarial and administration teams in a very short time frame, to help prepare the scheme for a potential transaction. This included: 

• preparation of a detailed benefit specification;
• data gap analysis;
• electronic address tracing; 
• marital status tracing; and 
• contingent spouse pension calculations. 

We also worked closely with the legal advisers and the sponsor’s advisers to support the workstreams they were managing. Having a well-defined list of roles and responsibilities as well as a clear overall project plan helped ensure all parties were working collaboratively towards the overall goal.

In May, following a trustee selection process and input from the sponsor, we prepared the necessary materials to approach an insurer on an exclusive basis and received their quotation in the summer. We then advised the client on the insurer’s proposal and, having received agreement to proceed, managed the work required to complete the buy-in in September. With the volume of tasks and differing workstreams this required very close project management and we chaired weekly update calls to keep all parties aware of the project.

The team continues to provide post buy-in support to the client, helping embed new administration processes, working on post-transaction activities such as Guaranteed Minimum Pension projects and further data cleansing activities.

Client objectives

The Trustees and the sponsor were keen to:

• manage the long-term risks associated with the scheme;
• explore the project on an accelerated timeframe to take advantage of a market opportunity and potentially attractive insurer pricing; and
• ensure that any transaction achieved good value (by setting specific financial metrics to be met).

Outcome

The objectives set by the client and sponsor were achieved - the trustees and sponsor expressed their gratitude for our support through the process.

Skills demonstrated

The key skills we exhibited throughout the process included:

Collaboration and people management

We successfully collaborated with other parties, including the trustees’ legal advisers, investment consultants and the sponsor’s advisers.

From the outset, we clearly divided roles and responsibilities between advisory firms to help everyone work collectively towards a shared goal. We then managed progress of each workstream against the project plans to maintain momentum and adhere to the required timescales.

During the most pressurised parts of the project, in particular the final execution phase, we led weekly project calls between all parties to ensure efficient decision-making and to keep our client well-informed of developments.

We supported them with understanding the liquidity requirements and helped the sponsor to understand the complex premium payment process (made more complicated by the restructure of the existing buy-in).

Chris Hawley, Risk Transfer Partner said: “it is a delight to have completed this transaction and to have helped our client throughout a busy and intensive period of activity. It’s great to hear from our client that BW were “a pleasure to work with” and a “safe pair of hands” throughout the project.

Providing a bespoke service

We always provide a tailored service to our clients, rather than applying a ‘one size fits all’ approach.

We took the time to understand our client’s needs and those of the sponsor, and helped them understand the benefits of a full market approach in comparison to working exclusively with the insurer used for the existing buy-in.  We also structured a process around a specific price target specified by the sponsor’s advisors.

Flexibility

To progress a restructure of their existing buy-in alongside the main buy-in contract, we had to ensure we were adaptable and worked quickly to build this into our plans and progress the data and legal workstreams required.

Clear budget management

Tasks and budgets were clearly scoped out at each milestone stage, and we ensured that full transparency was provided on fees.
 

How we can help

We help our clients confidently manage their risk transfers, ensuring all stakeholders – trustees, employers, and other advisors – are aligned with a unified vision.

Contact Rosie Fantom or Chris Hawley directly if you are interested in finding out more.