UK insurers may show a heightened appetite for entering the bulk annuities market next year after a slow start in 2021, according to the latest analysis.
Research by professional services consultancy Barnett Waddingham reveals that the value of buy-ins and buyouts completed in the first half of this year totalled £7.7bn; it described this as a “slow start to the year and less than expected”.
However, total projected market volumes for 2021 are expected to be around £30bn, thanks to a marked increase in the level of new business during second half of the year.
Total buy-in and buyout volumes in 2020 were £31.8bn, the second highest on record, despite the onset of the COVID-19 pandemic in the first quarter.
Barnett Waddingham said the relatively slow start to 2021 means that several insurers may not have satisfied their aspirations from the beginning of the year. This could lead to heightened appetite among these organisations as we go into 2022.
“The pipeline of business for 2022 from schemes seeking to insure their liabilities already looks very healthy,” said Gavin Markham, partner and head of bulk annuity consulting. “Both the supply and demand sides of the market are likely to support a very busy marketplace going into the new year.
“Although the economic outlook may, at first glance, appear more positive than at the beginning of 2021 the industry needs to remain vigilant.
"Uncertainty still remains around the future progression of COVID-19, continuing implications of the UK’s exit from the EU, as well as global macro challenges – all of which give the possibility for headwinds for pension schemes and the bulk annuity market.”
Meanwhile, the estimated average time for UK debenture schemes to be able to buy out their liabilities is 11 years.
Barnett Waddingham urges trustees and sponsors to look further ahead to “the ultimate endgame of pension scheme wind-up”, with a longer-term perspective helping them to tailor their transaction preparations and empower stakeholders to manage risks.
Image credit: iStock
Author: Huw Morris