Connect with us

News

UK pension trustees raise alarm on transferring risks offshore

Published

on

UK pension trustees raise alarm on transferring risks offshore

Stay informed with free updates

Senior industry professionals say they are worried about the growing involvement of overseas reinsurance firms operating outside UK regulation in corporate pension deals.

Many UK businesses with large pension schemes have offloaded them to life insurance companies. These “buyouts” — of pension plans and the assets backing them — are regarded as the gold standard for safeguarding benefits.

But as higher interest rates improved pension scheme funding levels, prompting a record £50bn of corporate pension deals last year, some UK life insurers have passed on portions of these pension scheme assets and liabilities to reinsurers, often based in Bermuda. Such “funded reinsurance” deals reduce capital requirements for life insurers, making it easier for them to do further deals.

Advertisement

“We don’t believe we fully understand the risks associated with these offshore insurance companies,” said Natalie Winterfrost, a professional trustee and former chair of the investment committee at The Society of Pension Professionals.

“They will be subject to different and potentially less stringent regulatory oversight.”

She added: “This is where the disquiet comes in for trustees — and their advisers too.” 

Victoria Tillbrook, a UK pensions expert at consultancy PwC, said “more and more” trustees wanted to fully understand developments in what insurers were doing, what was being reinsured and the position of the UK’s Financial Services Compensation Scheme, which compensates customers if a financial business fails.

Melanie Cusack, a professional trustee at Zedra, a corporate services business said: “More questions are being asked: if something happens to the reinsurer, what happens to the members?”

Advertisement

The Bank of England’s Prudential Regulation Authority, which supervises insurers, declined to comment. 

But it warned the industry last year that relying on funded reinsurance could create a “systemic vulnerability” for the sector, in the case of reinsurers failing and the original life insurers having to pay the pension benefits but without the underlying assets.

The regulator has proposed that insurers limit how much funded reinsurance they do with any one counterparty, among other safeguards.

The Association of British Insurers welcomed the PRA’s acknowledgment of the importance of reinsurance to well-functioning insurance markets, and said the sector gave “vital protection and peace of mind” to pension scheme members and employers.

Privately, insurers stress that funded reinsurance represents a small proportion of pension buyout deals, and that even a large reinsurer failure would be unlikely to create major problems for life insurers. They also point out that the FSCS would step in if there was a failure.

Advertisement

Disclosure on funded reinsurance is partial. Legal & General did £3.2bn of deals last year, Just Group £0.4bn in the same period and Pension Insurance Corporation a cumulative total of £2.5bn as at June last year, while Rothesay does not do any, according to people familiar with the details. All declined to comment. Aviva and Phoenix Group did not provide figures when asked by the Financial Times. 

Kunal Sood, managing director of defined benefit solutions and reinsurance at Phoenix’s Standard Life business, said the industry had “strict due diligence processes and regulation in place to ensure decisions are managed with policyholders’ interests in mind over the longer term”.

He added funded reinsurance was one of a number of risk management measures used by Phoenix “as part of a wider strategy to maintain a well-diversified, robust balance sheet for policyholder protection”.

The UK Pensions Regulator said it was monitoring market developments and was working on a” number of initiatives” with the Bank of England and the PRA.

Advertisement

News

The Maine Town That Actually Wants a Data Center

Published

on

This year, Maine nearly became the first state to pass a statewide moratorium on new data centers. But before the law could take effect, supporters of an A.I. data center project in the small town of Jay rallied to fight the ban — and won. So why do residents there want one? We traveled to Jay to find out.

Continue Reading

News

The Supreme Court says the U.S. can turn away asylum seekers at the border

Published

on

The Supreme Court says the U.S. can turn away asylum seekers at the border

The U.S. Supreme Court

Drew Angerer/AFP via Getty Images


hide caption

toggle caption

Advertisement

Drew Angerer/AFP via Getty Images

The U.S. Supreme Court on Thursday handed the Trump administration a tool that could make it far more difficult for asylum seekers to enter the United States.

Asylum is a form of legal protection available to people fleeing persecution in their home countries if they meet certain criteria. Under U.S. law, an asylum seeker who “arrives in” the U.S. is entitled to apply for asylum and generally cannot be removed from the country until their asylum application is processed. 

By a 6-3 vote, the high court ruled that federal law allows the government to stop asylum seekers from physically setting foot in the country, effectively keeping them from applying for asylum. 

Advertisement

The Obama administration was the first to try stemming the flow of asylum seekers that way. But the lower courts blocked the policy on grounds that it violated federal law by denying asylum to people who otherwise would have qualified for it, had they been permitted to literally put one foot over the border.

The Trump administration, however, sought to revive the policy, contending that the lower court’s ruling “deprives the Executive Branch of a critical tool for addressing border surges and preventing overcrowding at ports of entry.” And on Thursday, the Supreme Court agreed.

Writing for the majority, Justice Samuel Alito ruled that because asylum seekers are not in the U.S. when they are turned away at the border, they did not “arrive in” the country. Therefore, he continued, the legal protections for asylum seekers have not kicked in.

Writing for the liberal dissenters, Justice Sonia Sotomayor noted that Border Patrol agents speak with all immigrants at legal entry points and speaking with an agent is effectively the first step in “arriving in” the U.S.

Advertisement
Continue Reading

News

Federal judge halts Trump’s election executive order seeking to create a federal voter list

Published

on

Federal judge halts Trump’s election executive order seeking to create a federal voter list

BOSTON (AP) — A federal judge on Thursday halted President Donald Trump’s executive order that sought to create a federal voter list and limit who can receive a mail ballot.

U.S. District Court Judge Indira Talwani, who was nominated by Democratic President Barack Obama, sided with a coalition of nearly two dozen states that challenged the Republican president’s order in granting a summary judgment. Her ruling applies to this year’s midterm election cycle.

Plaintiffs argued in two lawsuits, both filed in federal court in Boston, that Trump’s order should be found unconstitutional because the states and Congress, not the president, have the power to set election rules. The judge agreed, noting in her ruling that the provisions of Trump’s order “unconstitutionally violate the separation of powers.”

It was the second ruling in as many days against executive orders Trump has signed seeking oversight of the nation’s elections. A separate ruling Wednesday prohibited an executive order he had signed last year that would have required people to show documents proving their citizenship when registering to vote.

The administration, in its motions to dismiss the lawsuits challenging the order seeking to establish a federal voter list, argued that the motions are premature and that plaintiffs lacked the legal basis to bring their claim based on the Administrative Procedure Act, which governs how federal agencies develop and issue regulations.

Advertisement

But in an interim order before Thursday’s ruling, Talwani said the motions pertaining to this year’s election cycle were relevant: “In light of the EO’s specific deadlines over the next three months, and the reality that elections will be occurring throughout this period with the November 3, 2026 midterm occurring in just five months, postponing judicial review is impracticable and may inflict significant hardship on Plaintiffs,” she wrote. That order denied the Trump administration’s motion to dismiss the challenges.

Trump’s executive order, the second one aimed at elections during his second term, comes as he continues to raise the specter of widespread voting by noncitizens as a reason to change election rules. But states already have detailed processes aimed at keeping their voter rolls accurate, and voting by noncitizens has been shown to be rare. It also is a felony that can be punishable by deportation.

Trump issued his second order in March after a bill he supported to overhaul voting stalled in Congress. The order would have had the federal government create a list of eligible voters and then directed the U.S. Postal Service to deliver mail ballots only to those on the list. Election officials argued that it was ripe for abuse and could cause chaos, and the postal union has objected to the idea of mail carriers policing ballots.

The Postal Service has published a proposed rule required by Trump’s executive order in the Federal Register. Among other things, the rule would not apply to primary elections or overseas ballots.

The lawsuit seeking summary judgment was filed by Democratic attorneys general representing 22 states and the District of Columbia. Also signing on were attorneys representing Democratic Gov. Josh Shapiro of Pennsylvania, which has a Republican attorney general.

Advertisement

The states also told the court that the move imposes a costly burden on election officials to comply and would spread fear about the possibility of prosecution. Stephen Pezzi, a lawyer for the Trump administration, had argued that no one would be prosecuted for violating the order.

In a separate lawsuit filed against the executive order, a federal judge in Washington, D.C., in May agreed with the Trump administration that it was too early to block the order because it had yet to be implemented. That lawsuit was brought by Democratic and civil rights groups, who have appealed.

Since his 2020 presidential election loss to Democrat Joe Biden, Trump has groundlessly claimed mail voting is rife with fraud and has launched a federal investigation into that year’s vote, even though repeated audits and investigations, including ones run by Republicans, found it was free of widespread fraud. Trump also has said he wants to “take over” election administration in Democratic areas.

Advertisement
Continue Reading
Advertisement

Trending