ICI Splits $1.2B Buy-In with Two Insurers

The UK chemical firm has now completed 11 transactions in three years using its innovative “umbrella” contracts.

UK manufacturing giant ICI has obtained a further two buy-ins for its pension fund, securing £980 million ($1.2 billion) of benefits.

Legal & General took on £390 million, while Scottish Widows—which has been active in the UK market for less than a year—insured £590 million.

The ICI Pension Fund has completed buy-ins worth £2.5 billion this year alone, reported consultant LCP, which advised on the deal. This brings its total transactions to 11, covering 75% of liabilities, since it began an innovative process of de-risking in 2013.

Clive Wellsteed, partner at LCP, said ICI had saved “well over £100 million over the past two years” through its standardized contracts and panel of insurers.

“With a knowledgeable and proactive trustee board, well-rehearsed processes, and umbrella contracts with insurers already in place, we have been able to achieve considerable savings in insurer pricing,” Wellsteed said.

Heath Mottram, CEO of the ICI Pension Fund, said his fund’s method could become “a blueprint for how larger schemes will insure their liabilities at scale through buy-ins in the future.”

Mottram and his team have divided the fund into tranches, with each one insured separately when the trustees are able to secure the best price. Most notably, the fund insured £750 million with Legal & General eight working days after the UK’s referendum on European Union membership, saving £10 million on the price due to favorable market movements.

“We have seen an increase in insurer appetite and activity since the EU referendum in June,” Wellsteed added. “For schemes that are holding bonds or gilts or have hedged interest rates, there are compelling opportunities to de-risk at attractive levels through buy-ins and this is generating significant interest from schemes we are speaking to.”

Related: Brexit Boosts £230M Buy-In & Philips Seals UK’s Biggest Ever Full Buyout

| Nick.Reeve@strategic-i.com | (44) 207 397 3827