Bmw looking to insure UK pension liabilities
By Andrew C., 26 Aug, 2010. 0 Comments
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BMW AG is joining a list of companies looking to manage their pension liabilities. Its British pension fund is thinking of ways to cover the risk posed by people living longer. BMW said that the schemes' trustees are consistently on the lookout for options to control and reduce the risks associated with the financing of the scheme. The Financial Times said that the scheme aims to insure 2.5 billion pounds ($4.1 billion) of longevity risks from the scheme. According to the defined benefit pension fund's last valuation report in April 2007, it had 4.4 billion pounds in liabilities and a 584 million deficit BMW said the scheme was working toward matching its liabilities. One method to reduce the risk is through longevity swaps, under which a pension scheme can exchange the uncertainty connected to the costs of financing pensions over a longer term with a pre-determined stream of cash with a counterparty. This in return, takes on the longevity risk for the lifetime of the swap.
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