Total longevity risk transfer in H1 2018 reached a record £21.8bn, including a £2bn longevity swap by National Grid in May and the £12bn annuity “back-book” transfer from Prudential to Rothesay Life in March. This exceeded the previous record of £11.9bn set in H1 2014.
LCP’s analysis of insurer data for H1 2018 reveals:
Pension Insurance Corporation (PIC) wrote the largest volume in H1 2018 at £3.3bn (a 42% market share) retaining their leading position from 2017. Aviva followed with a 20% market share writing £1.5bn in H1 2018. Both insurers’ H1 2018 volumes are only slightly short of their 2017 full-year totals (PIC £3.7bn and Aviva £2.0bn).
Scottish Widows has significantly increased its volumes in 2018, increasing their market share to 14% (£1.1bn) in H1 2018, putting them in third place overall, up from 5% (£0.6bn) for 2017 full year.
The largest volume insured by a single scheme in H1 2018 was £1.4bn by the M&S Pension Scheme, split across two buy-ins with Aviva and Phoenix Life. This was Phoenix Life’s first open-market transaction, following a pensioner buy-in with their own scheme in 2016. The largest single transaction was the £1.3bn pensioner buy-in by the Siemens Benefit Scheme with PIC.
Charlie Finch, partner at LCP commented: “At the start of 2018 we predicted a record year for buy-ins and buy-outs on the back of improved funding positions. Combined with arguably the best insurer pricing in 10 years, 2018 has indeed got off to a flying start, breaking all previous records for half year volumes.”
“Buy-ins and buy-outs are now an established risk management tool for large blue chip companies. The pension plans of Heathrow airport, Littlewoods, Marks & Spencer and Siemens have all completed large pensioner buy-ins in 2018; Toshiba and PA Consulting have both insured UK pension plans in full. I would encourage all pension plans to obtain an assessment of their buy-out position, building in the latest improvements, as many are finding they are in a much better position than they realise.”
“Looking forward, I have little doubt that 2018 will set a new record of over £15bn of buy-ins and buy-outs for the first time. The challenge for insurers is scaling up to process the higher number of transactions and to source the greater volume of assets necessary to continue to offer pricing at current attractive levels. Pension plans should step back and consider their strategy for approaching the market. We already have a queue of transactions targeting 2019; I am confident that there will continue to be attractive opportunities but in a busier market they may be harder to access.”
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