Bulk annuity deal volumes on track to hit £35bn in 2022

The number of bulk annuity transactions declined between the third and fourth quarters of last year, dropping from 17 to 12 respectively — albeit the fourth quarter’s volume of £5.4bn was still  £800mn higher than in the previous period.

Demand has been high throughout 2022, however, with Moody’s Investors Service predicting that a glut of mid-sized transactions could ensure total annual liability deals amounting to around £40bn by the end of the decade.

LCP predicted in May that there would be a “flurry of activity” throughout 2022 as defined benefit schemes look to accelerate their derisking plans, citing a big jump in funding levels on full bulk annuity transactions for many schemes — in some cases more than 5 per cent — that occurred during the first months of the year.

Now, Hymans Robertson has estimated that buy-in and buyout volumes were expected to amount to between £10bn and £12bn for the first half of the year. 

Its survey of insurers suggested that total volumes for the second half of the year could amount to around £25bn, taking the year’s total to £35bn, up from £27.7bn in 2021.

James Mullins, head of risk transfer at Hymans Robertson, said: “The spread of activity in the buy-in market during 2022 is shaping up to be similar to 2021, with a relatively modest level of activity in the first half of the year and then a very busy second half of the year.  

“The insurers are getting very busy, receiving a significant number of buy-in quotation requests over the summer, which we expect will mean that the second half of 2022 becomes the second-busiest six-month period ever for the buy-in market.”

If this happens, it would make 2022 the second-busiest year on record for buy-ins and buyouts, while 2023 is on track to be even busier, Mullins explained.

“The rapid growth in demand for pension schemes to insure their risks, along with improved pension scheme funding levels, attractive insurer pricing and new alternative risk transfer options, means that we expect a record-breaking year for buy-ins and buyouts in 2023,” he continued. 

“This is likely to exceed the £44bn that we saw in 2019. We also expect around £50bn a year of buy-ins and buyouts on average over the next 10 years, in addition to longevity swaps. 

“That means by the end of 2031, £1tn of pension scheme liabilities will have been insured, covering 5mn members’ benefits.”