Linklaters has advised Legal & General on the conversion of Legal & General Pensions Limited (LGPL), into an insurance special purpose vehicle (ISPV) with effect from 1 November 2007.
It is the first ISPV to be authorised by the Financial Services Authority (FSA) in the UK. An ISPV is a type of insurance entity regulated by the FSA. It is neither an authorised insurer nor a pure reinsurer. ISPVs were introduced in the UK less than a year ago and were originally expected to be used primarily to allow insurers to access external finance from capital markets to support insurance liabilities. However, the conversion of LGPL has shown that ISPVs are also appropriate vehicles for use in a purely internal reinsurance arrangement.
LGPL was established as a pure reinsurer in December 2006. Since that time, LGPL has reinsured its immediate parent company, Legal & General Assurance Society Limited (LGAS), in relation to all non-linked non profit pensions and annuity business. LGPL’s conversion into an ISPV largely reverses the capital inefficiency previously created by the need to hold regulatory capital within both LGAS and LGPL.
The FSA has granted the necessary waivers which enable LGAS to take credit for the reinsurance to LGPL.
Victoria Sander, partner in Linklaters' corporate insurance practice, commented:
“We are pleased to have advised Legal & General in relation to this cutting-edge development. By converting LGPL into an ISPV, Legal & General has been able to reverse a capital inefficiency created when LGPL was first established. The use of the ISPV concept as part of an intra-group arrangement shows that the potential for using ISPVs is greater than may originally have been thought.”
The Linklaters team was led by Victoria Sander, assisted by managing associate Tim Scott.
For further information, please contact:
Sarah Peters on +44 20 7456 2153 or sarah.peters@linklaters.com or Rupert Winlaw on +44 20 7456 3219 / rupert.winlaw@linklaters.com
