Insurance company Paternoster, which takes on the risks from defined benefit (DB) pension schemes, is to lose 24 employees in a business restructure, and is to inject £5 million of new capital into the Group to ensure it is able to write new business in the future.

The longevity-only risk transfer market, which has grown and Paternoster says is set to continue to grow, is one other driver of the Group's decision to inject new capital.

While Paternoster predicts greater demand for buy-outs of DB scheme obligations as the markets begin to improve, the Group has stood by its decision to postpone writing new business until they are more financially viable, or when the economic outlook significantly improves.

"The current interest being shown by defined benefit pension trustees and their corporate sponsors in 'longevity swaps' illustrates the continuing focus on reducing the risks inherent in their schemes," commented Ed Jervis, chief executive at Paternoster following Mark Wood's promotion to deputy chairman.

"Although credit markets have improved over recent months, the market for defined benefit pension scheme buy-outs will remain subdued for some time yet. At the same time many corporate sponsors face pressure on their cash flows. As a result, pension trustees and their corporate sponsors' desire to reduce risk will increasingly focus on longevity-only solutions.

"Nonetheless there remains an overwhelming logic for corporate sponsors to fully transfer their pension scheme obligations from their balance sheets to an insurer, which provides solvency capital to support the promise made to pay pensions."

Wood added: "Paternoster's board and shareholders are determined that the company will remain a leader in what will once again be a rapidly growing market. Meanwhile, the proper governance of our business and of course the interests of our policyholders are of paramount importance."

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