On the go: Pension scheme buy-ins, buyouts and longevity swaps have insured £250bn of longevity risk since the market took off in 2007, which corresponds to 15 per cent of UK defined benefit liabilities, according to analysis from Hymans Robertson.
The consultancy's latest half-yearly risk transfer market report, published on Tuesday, showed that buy-ins/buyouts reached around £160bn, while longevity swaps have totalled some £90bn.
According to James Mullins, head of risk transfer at Hymans Robertson, the past decade saw the “market for pension scheme buy-ins and buyouts truly come of age as it grew from relative infancy to the impressive £43.8bn of premiums we saw written in 2019”, which is “an eight-fold increase compared to 2010”.
In 2019 alone there were 153 buy-in and buyout transactions at an average transaction size of £286m, an increase of 39 per cent when compared with the 2018 average of £206m, the research showed.
Mr Mullins noted that there were five buy-in and buyout transactions that were each more than £3bn in 2019 – Allied Domecq, Asda, British American Tobacco, Rolls Royce and Telent – compared with only one such transaction occurring in prior years, and “inevitably these mega transactions hit the headlines”.
“However, interestingly the smaller transactions of less than £1bn each still accounted for around £15bn of buy-ins and buyouts during 2019 alone, which is a further sign of how this market is maturing.”
He stated that the UK pension scheme risk transfer market is “leading the world in terms of volume, maturity and innovation, with around £250bn of pension scheme longevity risk now having been insured via buy-ins, buyouts and longevity swaps”.
He added: “To put that into context, that means that the longevity risk associated with around 15 per cent of all DB pension scheme liabilities in the UK has now been insured, up from just 1 per cent 10 years ago.”
