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KPMG completes third Group Insure transaction for £33m pension liabilities

KPMG completes third Group Insure transaction for £33m

KPMG has completed its third tranche of its Group Insure (GI) solution, helping two pension schemes (of £24m and £9m) secure a total of £33m of liabilities in December 2018.

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James Staveley-Wadham

Senior Manager, Pensions Insurance

KPMG in the UK

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KPMG has completed its third tranche of its Group Insure (GI) solution, helping two pension schemes (of £24m and £9m) secure a total of £33m of liabilities in December 2018.

GI helps smaller schemes group together to purchase insurance as they struggle to access the wider insurance market on their own. To date KPMG has managed over £90m across three GI structures providing insurance cover to seven schemes (buy-ins and buy-outs) generating savings of up to 5% when compared to expected insurer pricing.

With the insurance market in 2019 looking likely to exceed 2018 volumes, it is expected to become increasingly difficult for smaller schemes to access competitive insurance pricing.

Research by the Pension Protection Fund’s Purple Book shows that the majority of schemes (80%) are small in size with less than 1,000 members with an average asset size of around £35m.

By comparison, the estimated average premium for insurance transactions in 2018 was more than double that of the previous year, exceeding £200m.

As a result a large proportion of UK pension schemes find it more challenging to achieve the competitive insurance pricing enjoyed by the much larger schemes, many of which are already consuming large amounts of capacity in the market.

James Staveley-Wadham, Senior Manager, Pensions at KPMG said: “We’re seeing strong demand in the bulk annuity market but this can have an impact on the smaller schemes which struggle to get insurers interested in quoting or quoting competitively.

“To prevent smaller schemes from being crowded out, our approach is to group schemes together with GI, coupled with an efficient process, which makes smaller schemes more attractive. The benefits of this approach has been demonstrated by our most recent £33m tranche.

“Looking ahead we expect demand to increase further as more and more defined benefit schemes become better funded and realise the benefits and efficiency of joining forces with other schemes, rather than facing headwinds by going alone. GI is an exciting opportunity for smaller schemes to obtain competitive insurer pricing and to secure members’ benefits.”

Further tranches will make use of Cloud BPA – KPMG’s cloud-based broking and collaboration tool – designed for use in insurance transactions to make the process quicker and easier.

In addition, the use of investment platforms such as Mobius Life, will reduce the risk of insurer pricing and the scheme’s assets moving in different ways, along with reducing insurer hedging costs, due to shorter timescales to pass the scheme’s assets to the insurer.

ENDS

 

Notes to Editors

  • For media queries please contact 

Ed Fotheringham Smith, PR Manager, 

T: 07920 572490

EEd.FotheringhamSmith@KPMG.co.uk

 

About KPMG

KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 16,300 partners and staff.  The UK firm recorded a revenue of £2.338 billion in the year ended 30 September 2018. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 154 countries and has 200,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.  Each KPMG firm is a legally distinct and separate entity and describes itself as such.

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