Tuesday, July 8, 2008

Swiss Re to join pension buyout market

(Telegraph) Swiss Re is to become the latest investment bank to enter the pensions buyout market. It estimates that schemes with a value totalling around £1,000bn are looking for risk management solutions.

Swiss Re will launch a new division in September to offer a range of pension services, including taking on companies' pension schemes and providing products to manage interest and inflation risk.

It will initially target companies with defined benefit plans worth at least £500m in the UK and Europe, and later schemes in the US.

Richard Farr, head of global pensions at the insurance giant, will head the 25-strong division.
He said: "Everyone accepts it is a £1 trillion-plus market place for liabilities in the UK. In Europe - for example in Germany, Holland and Switzerland - that size is £1 trillion, and £2 trillion in the US. It is big enough for quite a few players."

He said more companies were looking at options for their pension schemes due to "rising costs made worse by an ageing population and the volatile markets".

Swiss Re is already present in the pensions market but has traditionally bought up closed life assurance companies, rather than target individual businesses.

In a report to be published in next Thursday's edition of trade magazine Engaged Investor, the bank said it will also look to "package up" mortality risk and sell it on to hedge funds and other investors in short-term products.

Its decision to enter the buyout market comes as a wave of companies, including telecoms group Cable & Wireless, are considering passing on their pension plans to buyout specialists. Other investment banks such as Goldman Sachs and Lehman Brothers are looking to take on such schemes.

However, it is an increasingly competitive market and The Sunday Telegraph revealed this week that one buyout specialist, Synesis, is set to be taken over by rival Pension Corporation following its failure to complete a deal in two years.

It has also emerged that the head of Citigroup's insurance and pensions division, Wiltrud Heiss - who spearheaded its takeover of Thomson Regional Newspapers' £200m defined benefits pension plan last year - resigned from the investment bank three weeks ago.

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