Pension Insurance Corporation (PIC) wrote the largest volumes in 2017 at £3.7bn (2016: £2.5bn) overtaking Legal & General who wrote £3.4bn (2016:£3.3bn), a 30% and 28% market share respectively. Aviva were the biggest gainers increasing their market share from 6% (£0.6bn) in 2016 to 17% (£2.0bn) in 2017 putting them in third place.
LCP’s analysis of insurer data for 2017 reveals:
Total longevity risk transfer in 2017 reached £18.7bn, including £6.4bn of longevity swaps across five transactions.
The buy-in and buy-out volumes in 2017 were achieved despite the largest amount insured by a single scheme being limited to £1.2bn. This was due to a record number of mid-sized buy-ins and buy-outs over £100m in 2017 (34 confirmed to date), reflecting the extremely high-level of activity (the next highest is 24 buy-ins and buy-outs over £100m in 2016).
The largest amount insured by a single scheme in 2017 was £1.2bn by the Pearson Pension Plan, split across two buy-ins with Aviva and Legal & General. The largest transaction by a single insurer was the £725m full buy-in by The Former Registered Dock Workers Pension Fund with PIC.
There were no annuity “back-book” transactions in 2017. However, Prudential announced this week that they are transferring a record £12bn of their annuity portfolio to Rothesay Life and last month, Phoenix Life announced it is purchasing the Standard Life insurance business including its historic annuity portfolios.
Charlie Finch, partner at LCP commented: “2017 has seen a continued acceleration of de-risking activity by pension plans as they progress on their journey plans and funding positions improve. We expect to see a pick-up in full buy-outs in 2018 on the back of improved affordability. This is down to a combination of buoyant investment markets, strong price competition between insurers and continued evidence of reduced life expectancies.”
“Insurers are now widely pricing in the reduced life expectancies evidenced by the CMI 2016 mortality projections published last year, which is feeding into attractive pricing. The CMI 2017 mortality projections released earlier this month show a further reduction in life expectancies.”
“2018 has got off to a busy start with significant annuity back-books taken on by Rothesay Life and Phoenix Life. Insurers are reporting that they are busier than ever, with a number of £1bn plus transactions set to close over the coming months. We continue to anticipate record buy-in and buy-out volumes in 2018 of over £15bn. Combined with future back-book transactions this could lead to significant capacity crunches at times during the year. Schemes should consider carefully when to approach to market and be flexible to adapt their timelines to achieve the best possible pricing.”
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