BMW Gets Pension Liability Insurance With Deutsche Bank

The German carmaker completed the largest-ever insurance transaction with a pension scheme. 

(February 22, 2010) – BMW has offloaded 3 billion pounds ($4.6 billion) of UK pension liability, protecting themselves against the risk of paying for longer-living pensioners. The transaction reflects a growing trend among defined-benefit pension funds, which have faced increased pressure in recent years with falling returns and potentially detrimental deficits.


“This transaction represents a ground-breaking precedent in the rapidly growing market for insurance against longevity risks,” Paternoster Chief Executive Ed Jervis said in a statement.


For more stories like this, sign up for the CIO Alert daily newsletter.

Abbey Life, Deutsche Bank’s insurance subsidiary, completed the deal in partnership with specialist pension insurance company Paternoster. According to the statement, Abbey Life will insure longevity risks on the BMW pension scheme, transferring a percentage of the risk to reinsurers, which include Hannover Re, Pacific Life Re and Partner Re. Under the new transaction, the plan is insured against the risk that around 60,000 pensioners in BMW’s UK plan will live longer than initially expected.


“There will be no direct impact on members of the [pension plan], who will continue to receive their pensions directly from the scheme in the normal way,” a BMW spokeswoman said to the Wall Street Journal. “The longevity hedge simply makes it easier to budget for future pension payments and makes scheme funding more secure overall, which benefits everyone in the scheme.”


According to the latest figures available, BMW’s pension plan had assets of £3.86 billion, liabilities of £4.45 billion and a deficit of £584 million as of April 5, 2007, the WSJ reported.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href=''></a>; 646-308-2742