The pensions risk transfer market is set to grow to cover £15bn of liabilities in 2010, estimates Hymans Robertson, with £11bn of scheme risk transfer deals already completed in the last year.

The benefits and investment experts' Managing Pension Scheme Risk Report Q1 2010 shows that this £15bn could be made up largely by longevity swap deals, which have covered £7.1bn of liabilities in the last nine months alone.

Buy-ins and buyouts have already accounted for over £3.75bn of liabilities in the last year, and over £1bn has been completed in Q1 2010 alone. This period was the highest ever quarter for pension scheme risk transfers with over £4bn recorded, a result that can be attributed largely to BMW's £3bn longevity swap deal with Abbey Life in conjunction with Deutsche Bank and Paternoster.

For the future, James Mullins, senior liability management specialist at Hymans Robertson, predicts risk transfer deals to cover liabilities in excess of £15bn, split by £10bn for longevity swaps and £5bn for buy-ins and buyouts.

"This is due to a number of drivers. One is that market conditions have significantly improved over the last year meaning that risk transfer deals are more affordable for many UK pension schemes.

"In addition, pension schemes are increasingly keen to manage away as much risk as they can. And there is a snowball effect such that the more pension schemes that tackle pension scheme risk, the more pressure there is on other pension schemes to follow suit. The raft of pension scheme closures over the last 18 months coupled with the restrictions on tax relief for high earners' pension contributions are further increasing the demand from pension schemes to reduce risk," Mullins said.

He added that schemes must understand the risks that are inherent in their schemes and manage them appropriately.

Pension Insurance Corporation (PIC) continues to reign supreme over the year to 31 March 2010, taking almost a third of market share.

"It's interesting to note that several FTSE 100 and FTSE 250 companies have completed risk transfer deals for their pension schemes in recent months. We strongly expect to see more of the UK's largest companies completing risk transfer deals for their pension schemes later in 2010 and beyond and would not be surprised to see new records set in terms of the size of longevity swaps, buy-ins and 'DIY buy-ins'.

"While we will undoubtedly see an upswing in the number of companies offloading longevity risks, one of the obstacles to pricing longevity swaps is predicting life expectancy correctly. Companies and trustees need to understand their scheme's particular longevity risks which are based on the unique characteristics of their membership," Mullins concluded.

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