FTSE 100 risk settlement deals reach £70bn

Risk settlement deals completed by firms in the FTSE 100 has hit £70bn, Aon has revealed.

Of the 100 companies in the index, 32 have taken steps to remove longevity risk though bulk annuities and longevity swaps.

Aon found that most companies achieved their de-risking aims through buy-ins and pensioner longevity swaps, although the appetite for buyouts is growing.

This year, the buyout transaction value record was broken twice, first by Legal & General and Rolls-Royce in a £4.6bn deal, then by Telent and Rothesay Life in a deal worth £4.7bn.

The 32 firms taking steps to de-risk represent more than one third of FTSE 100 companies with defined benefit schemes.

Commenting on the findings, Aon Risk Settlement Group partner, John Baines, said: “The risk settlement markets have grown significantly in recent years, but an important fact that is often overshadowed is that the UK’s largest companies are at the forefront of this surge.

“Reaching £70bn of risk transfer is a significant landmark and is indicative of the increasing attention that pensions risks are getting at the most high-profile UK businesses.

“Insurance solutions send a very clear message to analysts and shareholders that management are proactively addressing the issue of pension risk.

“Indeed, following some of the recent buyout transactions, the participating companies have seen an increase in share price.

“The pension risk settlement market has generally seen gradual but significant growth, but with this backdrop we believe the number of pension risk settlement transactions will accelerate as they climb the agenda of FTSE100 companies and become seen as a reliable way to remove risk and secure pensioner benefits.”

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