Deutsche Bank Announces ‘Largest Ever’ Pensions Longevity Deal

In what it described as the "largest ever longevity insurance transaction," Deutsche Bank has taken on almost 3 billion pounds (3.4 billion euros) in pension liabilities from automobile maker BMW.

The insurance cover will be provided by Abbey Life, a wholly owned subsidiary of Deutsche Bank, on behalf of about 60,000 pensioners in the BMW (UK) Operations Pension Scheme.

The deal was put together by specialist London-based insurer Paternoster Ltd., which specializes in the bulk annuities market. In addition to structuring the agreement, Paternoster has been dealing with a panel of reinsurers that includes Hannover Re, Pacific Life Re and Partner Re. Deutsche Bank is Paternoster's biggest shareholder.

Ed Jervis, chief executive officer of Paternoster, suggested that "a couple more" major deals may be in the works for the first half of 2010. "They take a long time to put together," he told BestWire. "So nothing happens enormously quickly."

Nardeep Sangha, chief executive officer of Abbey Life, said in a statement that the "landmark" deal involved a combination of Abbey Life's "balance sheet strength and internal expertise with the specialist pensions and longevity know-how at Paternoster. As this market develops we are committed to providing innovative solutions to U.K. pension schemes," said Sangha.

Rashid Zuberi, Abbey Life's chief risk officer, said the insurer has "been able to manage the overall risk of the transaction to deliver a cost-effective way for the scheme to mitigate a large and complex risk."

Jervis said the deal represents "a clear signal" from pension trustees in a difficult economic environment that they want to de-risk their funds. Paternoster, which will not be taking risk onto its books, has done 42 pension buy-outs and buy-ins, Jervis said.

"It is probably the most complicated transaction I have ever been involved in," Jervis said. "It's a lot bigger than anything that's gone before."

(By Robert O'Connor, London editor: [email protected])