|
Aon is unsure
whether the insurance buy-out market is able to handle high levels
of demand.
The consulting firm raised its concerns on the back of research
showing that the insurance buy-out market for defined benefit (DB)
pension schemes has recorded a third successive strong quarter.
Financial conditions are continuing to make buy-out attractive to
pension schemes with the market surging by 80 per cent in the second
quarter from the first quarter of 2008. The market is now valued
at £2.7bn, compared to £1.5bn in the first quarter of
2008.
Aon’s quarterly research found that the 84 cases placed in
the second quarter of 2008 was comparable to the 86 of the previous
quarter, and the total value of business placed was over £847
million more than the previous record-breaking value of the fourth
quarter of 2007.
Aon notes, however, that with high levels of activity comes high
demand, and reported that insurers are under stress to cope with
this increase. As a result, slower turnaround times, greater reluctance
to provide full quotations and a more selective approach to which
cases to focus on have been seen.
There is also now less competition than previously seen in relation
to cases below £20 million, as more providers focus on larger
schemes.
Paul Belok, principal and actuary at Aon Consulting, commented:
“Interestingly, whilst the volumes transacting are historically
high, we have seen the first casualty in the battle for market share,
with Synesis pulling out of the fray. On the other hand, Swiss Re
is a new entrant and there may be more to come.”
Belok is sure that the coming months will see a struggle between
buy-out and buy-in.
“In our view the level of transactions that proceed will depend
to a large extent on whether the pricing continues to appear attractive
and, in particular, on movements in bond markets and continuing
appetite amongst insurers to secure business.”
- Pensions Age
August 2008
|
