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KPMG completes third Group Insure transaction for GBP33 million of liabilities

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KPMG has completed its third tranche of its Group Insure (GI) solution, helping two pension schemes (of GBP24 million and GBP9 million) secure a total of GBP33 million 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 GBP90 million across three GI structures providing insurance cover to seven schemes (buy-ins and buy-outs) generating savings of up to 5 per cent 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 per cent) are small in size with less than 1,000 members, with an average asset size of around GBP35m. By comparison, the estimated average premium for insurance transactions in 2018 was more than double that of the previous year, exceeding GBP200m.
 
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 (pictured), Senior Manager, Pensions at KPMG, says: “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 benefit of this approach has been demonstrated by our most recent GBP33m 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.

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