Battle Over UN Pension Reform Rages On | Chief Investment Officer

The world’s most senior diplomat is being called on to referee the relentless infighting surrounding the management of the United Nations (UN) pension fund.

“We urge you to… reject the organizational changes proposed by the CEO.” — UN staff union appeal to Ban Ki-moonA staff union has launched an online petition addressed directly to UN Secretary General Ban Ki-moon, urging him to strike down a package of policy changes proposed by the CEO.

“We believe these changes will (1) damage the environment in which our staff colleagues at the fund are required to work; and (2) undermine the integrity of our fund, including its investments,” the document stated. “We urge you to maintain the structure and functions of the UN Joint Staff Pension Fund and reject the organizational changes proposed by the CEO.”

Since May 6, the petition has gathered 1,809 signatures.

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The union has tried this method before. Almost exactly a year ago—May 15, 2014—the labor organization began gathering signatures on another petition aimed at pressuring the secretary general into blocking the reforms.

“UN Secretary General Ban Ki-moon: Protect our pension fund from the wolves of Wall Street,” the 2014 edition’s headline read. Twelve months later, the title message had scarcely changed: “Mr. Ban Ki-moon, Secretary General of the United Nations: Maintain financial and structural integrity of UN Pension Fund.”

In the 12 months that elapsed between the two petitions, the union and pension management made no meaningful progress towards an agreement, if anything they grew more polarized. The relationship between the two parties demonstrably worsened.

Union officials accused CEO Sergio Arvizú of “massive fraud” last month during an emergency stakeholders meeting. A publically available video recording showed labor leaders detailing a litany of allegations against senior fund management, including tampering with documents, undisclosed conflicts of interest, splitting a contract into two parts to avoid oversight, and allowing certain employees to work beyond the mandated retirement age.

Arvizú shot back at the claims shortly thereafter in a letter to members, calling the charges “totally unfounded” and “fabricated to damage the fund.”

“It is incomprehensible why the staff union and the fund’s staff representatives oppose and vilify the efforts of the fund’s governing bodies and management to improve the financial control environment of the fund,” he wrote.

Yet the opposition’s platform has scarcely changed. The proposed governance revisions “would, in our view, result in an unwarranted concentration of power and authority in the hands of the CEO,” the union’s latest petition stated.

As the hardening conflict enters another year, one element has markedly changed. By this time last year, roughly a week into the petition campaign, nearly 10,000 people had signed up in support. This year, signatures have yet to break 2,000.

UK insurer Zurich is to transfer £1.2 billion ($1.9 billion) of individual annuities to Rothesay Life as it seeks to offload parts of its legacy business.

Under the agreement, Rothesay will initially reinsure 28,000 policies before taking on full responsibility for payment and administration through a “part VII transfer” once regulatory and court approval has been granted. A part VII transfer is a UK legal process for the transfer of insurance business.

Rothesay Life—founded in 2007 as a subsidiary of Goldman Sachs—reinsured £2.8 billion of longevity risk last year, a record figure for the company. So far in 2015 the group has taken on £1.7 billion of new business, including a £675 million buy-in of the Lehman Brothers UK pension fund.

Gary Shaughnessy, CEO of Zurich UK Life, said the deal “reduces our risk exposure” and is part of a broader aim to refocus the business and achieve “sustained profitable growth”. The transaction also follows Zurich’s offloading of £3.9 billion of annuities to Windsor Life in 2007.

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Rothesay Life CEO Addy Loudiadis added that the agreement was part of “an increasing trend of legacy annuity books transferring to specialists”.

As well as writing reinsurance and other pension risk transfer business, Rothesay has also been acquisitive in recent years. In 2011 it bought Paternoster, bringing across £3 billion of bulk annuity business, and last year the group acquired MetLife Assurance, including its £2.5 billion portfolio.