The arrival of further new entrants to the buyout market in 2015 brings the number of insurers active in the pension buyout market to nine. But, according to the team behind the Skyval platform, the newly enlarged market will make it harder for schemes to obtain accurate pricing from across the market as insurers look to focus their resources to maximum effect.
Commenting, Jerome Melcer, Skyval Head of Development and Director at PwC, said: “The increased level of competition means that insurers are now less likely to win any given deal. Given that insurers will look at each deal brought to them and assess the cost of competing against the likelihood of success, there is a genuine risk that insurers will now become more selective about entering in to deal processes. Especially for smaller deals, it will become harder for schemes to locate best value from across the entire market.”
At the same time, deal volumes are expected to increase sharply from 2015, as demand is driven by schemes looking to take advantage of a more competitive market place. Skyval is estimating that there is the potential for deal volumes to reach £20bn in 2016, up from around £11bn this year, but subject to availability of insurer resources to price and transact these deals
“This poses a challenge for market participants; find new ways to connect schemes and insurers while protecting insurer resources.
Technology will play a major role here, but only if focused on relieving insurers of the “heavy lifting” involved in providing schemes with reliable pricing. Typically, it takes insurers 6-8 weeks to provide a quote for a scheme, but technology is already having a dramatic effect on the pricing process. For example, Skyval Insure provides insurers with a ready-built pricing model for each scheme PwC take to market, and can thus deliver scheme-specific pricing from across the newly expanded insurance market within five days of a request. This is a major benefit to schemes and insurers; deals that are viable can be identified and pushed forward to transaction with maximum efficiency,” Melcer said.
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