2/3 bulk annuity deals in 2019 from 7 ‘mega transactions’

Seven multi-billion-pound transactions accounted for around two-thirds of the record-breaking bulk annuity transfer volumes for 2019, according to new research.

Hymans Robertson’s annual Risk Transfer Report found that the seven ‘mega transactions’ amounted to over £24bn, higher than total buy-in and buyout volumes during the entirety of 2018’s 162 transactions.

The total value of UK deals completed in 2019 was more than £40bn, almost doubling the total amount from the year before.

Hymans Robertson partner and head of risk transfer, James Mullins, said: “In 2019 there were 10 transactions over £1bn and five transactions over £3bn, including the largest ever buy-in and buyout.

“These mega-transactions inevitably receive top priority from several of the insurers, which means that smaller pension scheme transactions need to work even harder to stand out from the crowd.”

Around £10bn-worth of deferred member liabilities were insured during 2019, another record amount, which the report said was a result of improved pricing for insuring deferred members due to insurers improving their sourcing of long-dated assets and sharing longevity risk with reinsurers.

Mullins noted: “Not all trustees and sponsoring employers are aware that the cost of insuring deferred member liabilities has materially reduced in recent years.

"Pension schemes need to make sure they have access to a well-informed and realistic view of the cost of buying-out, to avoid missing out on opportunities to insure risk much earlier than they may have believed was possible.”

Improvements were also seen in pension scheme funding levels amid solid asset performance and drops in life expectancy, according to the report.

However, the research found disparity between the demand for buy-ins and insurer capacity, with one unnamed leading insurer declining to quote on around 50 buy-in requests, which consisted approximately £10bn worth of business.

Mullins argued that, despite the increased competition, excellent insurer engagement and pricing could be secured through solid preparation prior to engagement with insurers and a demonstration that the scheme has “strong governance and stakeholder support for the transaction”.

“It is also ever more important deciding which insurers to approach and in what manner in order to maximise their engagement and optimise outcomes for the pension scheme and its members,” he added.

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