Despite a quiet 2009 for the buyout market the outlook is good, according to Pension Capital Strategies.

The firm's latest Market Watch report, which analyses the developments in the market for 2009 to date, said it is encouraging for sponsors and trustees that UK-based insurance companies have not been forced to go to the Government for support, despite a market contraction since 2008.

"Although 2009 has been disappointing in terms of deal volumes when compared to 2008, the figures must be considered in the context of the wider economic climate," commented Tiziana Perrella, head of buy-out services at PCS. "Given what has happened to the wider economy, the figures look reasonable healthy. All insurers maintain that they have a healthy pipeline for Q4 and we expect more deals to conclude prior to the year end, with up to £4bn worth of deals being written over the year."

The analysis shows that while prices have appeared to stabilise over the past few months, the final requirements of 2012's introduction of Solvency II may have a significant impact. "We believe that insurers already included a margin in their pricing basis to reflect the expected requirements of Solvency II. Provided there is some recovery in the economy, we believe that the buy-out market will continue to be healthy in 2010. In particular, it is now easier for smaller schemes to obtain competitive quotes and therefore we expect increased activity in this segment of the market," Perrella added.

The full report is available here.

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