2020 risk settlement market could hit £50bn

The predicted figure, which includes bulk annuities and longevity swaps, means that 2020 could be a record year for this market, after the £40bn mark achieved in 2019.

While Aon’s risk settlement team reported seeing fluctuating levels of market activity in the first half of the year, an expected surge in deal activity towards the close of the year should be sufficient to hit the £50bn figure.

Mike Edwards, partner at Aon, said: “More than £25bn of transactions took place in the first half of this year, across both the bulk annuity and longevity swap markets. That’s clear evidence of the resilience of this market, of pension schemes’ need for these solutions, and of the way the market has developed in recent years.

“The third quarter was busy for the market, and we also know that significant insurer and reinsurer appetite remains for closing further transactions before the end of the year,” Mr Edwards continued.

“Market timing has been a key theme throughout 2020, with very attractive pricing available to those schemes that have been ready to act. But some of the inevitable market uncertainty, driven by the US election and Brexit negotiations, will mean that schemes will need to take a robust approach to get transactions over the line.”

Stephen Purves, partner at Aon, added: “The risk settlement market has never had challenges like it’s had in 2020. However, the resilience of the industry and its ability to quickly adapt to the challenges faced this year has meant that the momentum of transferring risk to insurers and reinsurers has continued at pace.

“It also shows that these kinds of insurance-based, risk-reduction exercises are no longer seen as special projects for pension schemes, but something that they view both as achievable and as a priority. Schemes of all sizes are able to capture some fantastic pricing opportunities along the way.”