CMS advises Pension Insurance Corporation on landmark £6.5 billion buy-in with two RSA UK pension schemes

International law firm CMS has advised Pension Insurance Corporation (PIC), a specialist insurer of defined benefit pension schemes, on a buy-in with the trustees of two schemes, the Sal Pension Scheme (SALPS) and the Royal Insurance Group Pension Scheme (RIGPS), each of which is sponsored by the RSA Group (RSA). RSA is a wholly owned subsidiary of Intact Financial Corporation (IFC).

This is the largest ever bulk annuity transaction, insuring around £6.5 bn of liabilities relating to approximately 40,000 members.

Highlights:

• Landmark deal which addressed significant issues of timing and complexity, paving the way for other very large transactions 
• Complex structuring considerations included accommodating the Schemes' existing longevity and asset swaps
• Pricing agreed amidst unprecedented market volatility during the LDI crisis
• Improvement in pension scheme funding levels due to rising gilt yields created a favourable opportunity for the sponsor to accelerate the Schemes’ de-risking, as well as de-risk its own balance sheet, and for the Trustees to enhance member security
• Transaction facilitated by upfront contribution from Intact of approximately £500 million using excess capital, debt and preferred shares

CMS Partner, Jenny Nanalal, commented: “CMS is proud to have supported our long-standing client Pension Insurance Corporation on this transaction. A huge amount of credit should go to the Trustees, Company and PIC for demonstrating that large-scale, innovative transactions can be completed in an efficient and collaborative way, delivering a great outcome for members.”

PIC Head of Origination Structuring, Uzma Nazir, explained: "We are proud to have completed an extremely complex bulk annuity deal, the largest pension scheme to insurer transaction the market has yet seen. From pricing during the unprecedented volatility of the LDI crisis in the autumn of last year to structuring the buy-in to address the issue of asset suitability, this transaction overcame many of the hurdles that very large pension schemes face as they accelerate their de-risking plans in light of rising gilt yields."

The CMS team was led by partners Jenny Nanalal and James Geer (Financial Services) and Mark Jenkins and Pete Coyne (Pensions), supported by a firm-wide team comprising: Thomas Lockley, Owen Ross, Pippa Tasker, Mike Munro, Lisa Brown, Aleksandra Kalinowska, Michelle Bannon, Dan Meatyard, Rachel Lowe, Dillon Siebert, Ali Siddiqui, Blaine Cartin and Laura Clarke (Financial Services); Sam Dames, Jacob Gilkes, and Henry Bolton (Tax); and Laura McLaughlin, Claire Bradwell, Ellie Spare and Rachel Arnott (Pensions).

PIC press release.