The total value of UK bulk annuity deals is expected to exceed £35bn and could total £40bn by the end of 2019, according to Aon.

This could surpass the record set last year (2018), when over £35bn worth of bulk annuity deals were competed.

In the first half of this year the total buy-in and buyout volume by UK pension schemes reached £17.6bn, compared to £7.8bn in the first half of 2018.

Aon senior partner and head of risk settlement, Martin Bird, said that 2019 was “shaping into another good year” for schemes that are looking to de-risk through insurance.

He continued: “More schemes are improving their funding levels and insurers are providing exceptional pricing. There is also better sourcing of illiquid assets, increased competition and strong capacity from global reinsurers. All this is providing key capacity for the annuity market.

“We have already seen close to £18bn of business placed in the first half of this year – including the largest ever UK bulk annuity completed by Rolls-Royce – all of which underlines the appetite of the insurance market. We expect to see more large-scale deals during the second half of 2019 – and that could carry the total amount of deals to between £35-40 billion or more.”

Aon’s Risk Settlement Market 2019 report stated that the bulk annuity market was dominated by large transactions, with the biggest insurers concluding their largest volume of bulk annuities to date.

It found that smaller transactions of under £30m were also more commonplace, being boosted by attractive pricing.

Aon partner, Mike Edwards, added: “To make this all happen, many of the fundamentals of the market remain the same. It is still crucial for schemes of all sizes to do the preparatory leg work and to be able to articulate very clear objectives to insurers when they approach the market to secure the best deals.

“The market is also developing; in 2019 we are seeing increased appetite from sponsors and trustees to secure members’ benefits in full - which presents both new challenges and opportunities for insurers.

“Schemes need to be alive to this and to other wider market dynamics when designing and going through their own transaction process. We expect more situations in which bulk annuity negotiations are complemented with member options exercises which can deliver the best outcomes for all.”

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