On the go: Bulk annuity deals of £1bn or under reached a new high in 2021, in a year that saw volumes driven by momentum in the second half, according to Mercer research.
There were £22.9bn of ‘core’ deals in 2021, representing a 10 per cent increase on the previous year.
Mercer measured total bulk annuity premiums of £28.6bn spread across 157 transactions last year. This sat lower than the £31.8bn across 141 deals in 2020, and £43.8bn across 151 deals in 2019.
The pace of deals picked up in the second half of the year, with only £8.7bn worth of bulk annuity premia written in the first half of 2021, consultancy's research found.
Mercer’s head of risk transfer, Andrew Ward, predicted £50bn-£60bn of risk transfer deals in 2022. “Significant interest rate rises and widening credit spreads since the start of 2022 will have resulted in improved funding levels for many schemes,” he said.
“The unfolding market volatility, driven in part by the devastating situation in Ukraine, will nevertheless lend opportunity in 2022 for schemes that are well positioned, well prepared and actively scanning for opportunities.”
The second-half uptick in deals replicated a trend that has emerged since 2019 and was echoed by LCP’s findings, which registered almost half of the £28bn of risk transfers it measured last year in the final quarter of 2021.
Competition for buy-ins and buyouts was up, with five insurers securing a market share of at least 10 per cent in 2021, up from four in 2020 and three in 2019, LCP said.
The five companies were Aviva, Legal & General, PIC, Rothesay and Standard Life, which conducted buy-ins and buyouts each of at least £3bn collectively last year.
LCP also registered a shift towards mid-sized deals, in a similar vein to Mercer’s findings. LCP said that buy-ins and buyouts between £100mn and £1bn have tripled since 2015, now making up more than a third of all deals.
This may be happening at the expense of volumes of transactions worth less than £100mn, which dropped by a third over the same period.
Just four buy-ins and buyouts worth more than £1bn, meanwhile, were conducted in 2021, down from seven in 2020 and 10 in 2019.
“Insurer competition is at its most intense in a decade with five insurers vying for top spot last year,” said LCP partner Charlie Finch.
“Pricing is proving highly attractive as insurers hunt market share, helped by the rising yields on credit.”
James Mullins, head of risk transfer at Hymans Robertson, observed that most insurers were behind their targets by mid-2021. “This created particularly strong competition in the second half of the year,” he said.
“This was a key reason why the second half of 2021 was the second busiest six-month period ever for buy-ins and buyouts.”
