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Eversheds Sutherland and Mercer deliver ground breaking captive annuity deal

  • Ireland
  • General

22-02-2017

Eversheds Sutherland and Mercer have advised the Irish DB pension schemes of a leading global corporate on an innovative €450 million captive annuity transaction.

The transaction, which closed in December and covers more than 650 members, is the largest Irish pension risk transfer transaction of 2016.

The Eversheds Sutherland team was led by Head of Pensions Peter Fahy and on the collateral side by banking partner Steve Rodgers, with regulatory support from senior associate Chris Martin, and pension support from David McKeating.

The Mercer team was led by John O’Brien on the insurance side and Kieron Knight, Kenneth Edgar and Patrick Leonard on the consulting, actuarial and operational side.

The transaction is structured as a rolling buy in covering all accrued liabilities under the schemes, with top up insurance to be purchased on an annual basis.  The insurance contract, which is designed to operate for 60 years, is fully reinsured by a captive insurer within the sponsor group.  Given the long term nature of the contract, innovative risk management and asset management mechanisms were put in place as part of the structure.  A similar transaction was executed by the corporate’s UK pension scheme in parallel.

Peter Fahy, pensions partner at Eversheds Sutherland, said:
We are delighted to have assisted the trustees in executing this transaction, which is a win-win for all involved.  It is a great deal for the trustees, the scheme members and the sponsor, and an example of the innovative thinking which leading multi-nationals are applying to the issue of long term pension obligations.  The transaction was assisted by the collaborative approach adopted by all parties and their respective advisers, and was completed within a very challenging timeframe."

John O’Brien, Principal, Financial Strategy Group, Mercer, said:
This was a very innovative multi-geography captive annuity transaction and creates market precedent for multi-national corporates seeking to own and efficiently manage the financing of their global pension benefits in a manner that speaks to the objectives of local trustees”.

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