Pension Insurance Corporation (PIC) has concluded a £300m (€372m) pension insurance buy-in with a Siemens-sponsored UK defined benefit pension scheme, with a “significant” reinsurance with Siemens’s captive insurer.
The scheme in question is the VA Tech UK Pension Scheme, for UK employees of the VA Tech Transmission and Distribution business acquired by Siemens in 2006.
The insurance by PIC covers two tranches of pension liabilities, covering all of the scheme members (around 1,500).
The first tranche is for £100m and was insured in 2013, and the second, for £200m, was insured in December last year.
A “significant” proportion of the insured liabilities have been reinsured by PIC to Risicom, the captive reinsurer of Siemens.
Siemens sponsors several defined benefit schemes in the UK.
John Smith, head of pensions at Siemens, said: “There is an overall aim to de-risk the schemes in the medium term.
“Siemens’s Pension Captive Program, in collaboration with PIC, is an important and innovative part of the de-risking strategies, which works on a local level as well as at the Siemens group level.”
Mercer was sole actuarial, investment and bulk-annuity adviser to the trustees of the scheme.
It noted that the deal is part of a trend in de-risking by re-insuring back to a captive reinsurer.
Harry Harper, principal at Mercer and lead broking adviser to the trustees, said this was a market trend likely to continue “as sponsoring employers search for new ways to manage their legacy pension scheme risks, while providing their schemes with the security of a leading UK fronting insurer”.
He added: “Coming right at the end of 2015, this transaction paves the way for what will surely be an exciting 2016, with new ways of dealing with pensions risks continuing to emerge.”