On the go: New figures from Aon showed that 2020 was a record-breaking year for the risk settlement market, with 2021 likely to provide stiff competition.
Taking into account bulk annuity deals and longevity swaps, the risk settlement market exceeded £54bn last year, topping 2019’s £52bn, despite the difficulties imposed by the pandemic.
Pensions Expert reported on earlier predictions that the nature of the market would change in 2020, having a larger number of smaller deals rather than previous year’s trend, which saw the bulk of the value contained within a few large transactions.
Only three bulk annuity transactions in the first half of last year exceeded £1bn, compared with 12 over the same period in 2019, according to figures previously reported by LCP.
However, there were double the number of mid-sized transactions with values between £100m and £500m, with 22 occurring in 2020, which compares with 11 in the previous year.
Commenting on the new figures, Martin Bird, Aon’s head of risk settlement, observed that the changing nature of the risk settlement market, with fewer “jumbo deals” and a 50 per cent increase in transactions below £1bn, “meant more small and mid-sized deals, as well as increased numbers of pensioner buy-ins rather than full-scheme buyouts”.
“There was also a strong trend towards repeat buyer transactions, underlining that well-prepared schemes with nimble governance arrangements were particularly well placed to capture market opportunities,” he said.
“In many ways, this is a sure sign of the market’s increasing maturity, of its understanding of how deals can be put together, and of a significant improvement in streamlined transaction processes, which made them more attractive to insurers,” Bird continued.
He added that Covid-19 and its impacts had bolstered the desire of pension schemes to seek risk settlement measures, and that this is also likely to be a defining feature of 2021.
“The pandemic is potentially the largest combined economic and political shock to the UK since the immediate aftermath of the second world war,” he said.
“In that context, it is not surprising that we are seeing huge early appetite from schemes, and our expectation is that 2021 could be another record-breaking year for the industry.”
