The Association of British Insurers (ABI) has established a dedicated bulk annuities and investment board as part of a new governance structure.
The insurance industry trade body has set up four “product boards”, including the new Pension Insurance and Investment Board, which will oversee the ABI’s work on bulk annuities.
It will also take over the work of the Investment Delivery Forum, which was set up to monitor progress towards the insurance industry’s pledge to invest £100bn into assets which contribute to economic growth and the net zero transition over the next decade.
The Pension Insurance and Investment Board will be chaired by Just Group chief executive David Richardson.
Richardson said: “The insurance sector plays a pivotal role in ensuring pension security for millions while investing billions across the UK to support jobs, growth and infrastructure renewal.
“The ABI champions putting the customer at the heart of our industry, and I look forward to helping shape the strategic direction of our sector to maximise the benefits to consumers and the wider economy.”
Hannah Gurga, the ABI’s director general, said: “Our members have been clear that they want a stronger voice in shaping the priorities that matter most to them. These changes put that principle into practice.
“By elevating our product boards and creating the new Pension Insurance and Investment Board, we are sharpening our focus, speeding up decision-making, and ensuring members are driving the agenda on the issues that underpin the UK’s long-term financial security and growth.”
Growing bulk annuity sector under scrutiny
The ABI’s top-level restructure comes as the Prudential Regulatory Authority (PRA) has been scrutinising the bulk annuity market. With total volumes forecast to hit a record £55bn this year, the regulator has been studying the way in which providers use funded reinsurance to bundle together investment and longevity risk.
In a speech last summer, the PRA’s director of prudential policy Vicky White said the regulator was examining whether this form of bundling may give rise to “regulatory arbitrage” or “underestimation of risk”.
Consultancy group LCP has warned that a meaningful reduction in the use of funded reinsurance could increase bulk annuity premiums.
However, despite more than £500bn being transferred to a small number of insurers over the past decade, according to Hymans Robertson, a recent stress test exercise overseen by the Bank of England found bulk annuity providers to be well capitalised and able to withstand a “severe but plausible” economic shock scenario.
The ABI’s new governance structure
As part of the changes, the ABI said its board would focus on “sector-wide strategic discussions” and “major cross-cutting regulatory, political or consumer issues”, while delegating other issues to the relevant product board. Product board chairs will be given a seat on the main board if their firm is not already represented.
Baroness Kay Swinburne, chair of the ABI, said the new structure would provide “a robust framework as we work together to drive change for a resilient and thriving society”.
The other product boards are:
- Long-Term Savings Board: This focuses on defined contribution workplace pensions and is chaired by Michele Golunska, managing director of wealth and advice at Aviva.
- General Insurance Board, chaired by Colm Holmes, UK chief executive at Allianz.
- Health and Protection Board, chaired by Mark Till, chief executive of Unum UK.
