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United Kingdom ahead of United States in transferring pension risks


New risks being taken on by captives include pension longevity as well as catastrophes.

In February, Bermuda-based Artex Risk Solutions Inc. announced a new facility that allows pension funds to transfer their longevity risks directly to the reinsurance market. The facility enables pension funds to transfer away some of the risk involved with people living longer than expected, said president David McManus.

The Guernsey-domiciled incorporated cell company, Iccaria Insurance ICC Ltd., was developed in conjunction with London-based PricewaterhouseCoopers L.L.P., which helped set it up.

In July 2014, London-based BT Group P.L.C., which operates British Telecom, transferred about $27.4 billion, or 25%, of its BT Pension Schemes' liabilities to a Guernsey captive and reinsured the risk with Newark, New Jersey-based Prudential Insurance Co. of America.

While the trend is not as strong in the United States as the United Kingdom, “I suspect it'll become more of a global trend,” said Chris Lay, London-based president of global captive solutions at Marsh L.L.C.

Thomas P. Stokes, New York-based practice leader with JLT Insurance Management US, a unit of the Jardine Lloyd Thompson Group P.L.C., said captives also are moving “more and more into the catastrophic and less predictable type of risks,” such as funding real estate companies' high deductibles for earthquake premiums “so that it protects the balance sheet of the companies.”

While in recent years “there was a lot of discussion about employee benefits, that really hasn't taken off as much as people thought it might,” Mr. Stokes said.

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