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Types of contingent funding

LETTERS OF CREDIT

A guarantee from a bank with a strong credit rating to make a payment to the scheme on certain pre-agreed trigger events, in return for a premium from the sponsor.

SURETY BONDS

Similar to letters of credit, however the guarantee is provided by an insurer instead of a bank.

Case studies

Using a negative pledge to safeguard an existing dividend policy.

Using a Group Company Guarantee to manage Section 75 debt risk with the bonus of a big PPF levy saving!

Using an upside mechanism and escrow to mitigate the adverse effect of the Corporate Insolvency and Governance Act 2020 (“CIGA”) on benefit security.

Using contingent contributions to achieve fairness across stakeholders