On the go: The pensions risk transfer market is up 50 per cent in the first half of 2022 compared with last year’s H1 figure, with £12bn in buy-ins and buyouts making for the third-largest H1 figure on record, according to analysis from LCP.
Based on insurers’ final results for H1 2022, LCP concluded that competition in the market remains intense. Five insurers — Aviva, Legal & General, Pension Insurance Corporation, Rothesay and Standard Life — all wrote more than £1bn in the period.
L&G led the way with a total volume of £3.7bn, giving it a 31 per cent market share. Following in second place was PIC with £2.4bn, giving it a 20 per cent market share, significantly above the £400mn it wrote in the same period last year.
Aviva posted £1.9bn, amounting to a 16 per cent market share, while Standard Life wrote £1.6bn, for a 14 per cent market share. Rothesay rounded off the top five with £1bn, giving it an 8 per cent market share.
Of the three remaining insurers analysed, Just, Canada Life and Scottish Widows wrote a combined £1.3bn in buy-ins and buyouts.
The largest single transaction was a £2.3bn follow-on pensioner buy-in by the British Steel Pension Scheme with L&G. PIC took second place with a £1.1bn full buy-in by the EDS 1994 Pension Scheme, while Standard Life completed a £1bn buy-in with WH Smith in June. H1 2022 saw five other transactions exceeding £500mn.
LCP also found that the overall make-up of the market was broadly similar to H1 2021, with mid-sized buy-ins and buyouts (between £100mn and £1bn) making up 30 per cent of transactions compared with 33 in the same period last year.
Sub-£100mn transactions accounted for 67 per cent of transactions, up from 63 per cent in H1 2021.
Additionally, a £5.5bn longevity swap for the Lloyds Bank scheme was announced early this year, though 2021 saw three longevity swaps totalling £12.7bn in H1 2022.
LCP partner Charlie Finch said: “Buy-in and buyout activity has continued strongly into 2022, with volumes increasing by over 50 per cent in the first half of the year compared with 2021. Activity has been ramping up over the second half and we expect to increase further in 2023.
“The activity has been driven by surging pension scheme funding positions on the back of the biggest rise in long-term interest rates this century — 20-year gilt yields have more than trebled to 3.7 per cent pa since the start of the year,” he explained.
“We expect this to turbocharge demand from pension schemes looking to derisk next year. The challenge is that insurers simply do not have the resources to quote on all of the opportunities that could come to market.
“The schemes that win will be those which have invested in preparation across cleaning data, drawing up detailed benefit specifications, getting their investments transaction ready, and putting in place suitable governance arrangements with the sponsor. Such preparation will pay dividends over the coming years.”
