Guernsey Incorporated Cell at Core of Pension Risk Transfer Deal

A Guernsey-based incorporated cell is being used to reinsure the MMC UK Pension Fund in a £2 billion longevity risk transfer.

According to a statement from Guernsey Finance, the transaction, MMC UK Pension Fund's first longevity swap to include active members, will use incorporated cell Fission Gamma IC Limited to cover liabilities for 14,500 pensioners, deferred, and active benefit members.

Fission Gamma, a new Guernsey-based incorporated cell, was created to insure the longevity risk of the fund and to reinsure this risk with reinsurer Munich Re, Guernsey Finance said. Such longevity risk transfers allow pension funds to protect themselves against longevity risk.

The Guernsey aspects of the transaction were advised by law firm Carey Olsen, including Partner Christopher Anderson, Senior Associate Alex Mauger, and Associate Oliver Orton. The fund was advised by Mercer, a wholly owned subsidiary of Marsh McLennan.

Guernsey Finance said the use of special purpose insurance companies (SPVs) in the form of an incorporated cell to transfer longevity risk to the reinsurance market has become a somewhat standard practice in Guernsey, with incorporated cells being used in all longevity transactions structured through Guernsey to date.

This latest transaction is the third longevity swap structured through Mercer's incorporated cell company (ICC), Guernsey Finance said.

Guernsey Finance is the joint industry and government initiative created to promote Guernsey's financial services sector internationally.