The risk transfer industry is likely to grow significantly over 2023 with estimated market volumes of £40bn in the bulk annuity space and the potential for alternative transaction types to become more established.
According to the most recent analysis by Barnett Waddingham, the amount of bulk annuity transactions is predicted to hit £30bn in 2022 before rapidly increasing in 2023.
Barnett Waddingham says that schemes must move swiftly once they are in a position of funding where a transaction is feasible in order to lock in these improvements in scheme funding and safeguard against the possibility of any ensuing yield declines beyond 2023. Failing to do so might cause the substantial increases in funding levels observed through 2022 to be at least partially swiftly undone.
Around £12bn worth of buy-ins and buyouts were completed in the first half of 2022. This met the forecast for a robust pipeline of new business at the beginning of the year. It demonstrated an increased desire on the part of insurers to take on new clients after the previous year’s beginning was slower than anticipated (2021).
The second half of the year was significantly busier, which resulted in total anticipated market volumes of £30bn over 2022. This is true even if the year’s liability values decreased, especially during Q3 2022, as a result of sharp increases in nominal gilt yields. The identical deals might have translated into market volumes of roughly £40-45bn, which would have been significantly greater than in the previous two years, had these yield increases not taken place.
Barnett Waddingham head of bulk annuities and risk transfer partner Rosie Fantom says: “Many schemes are finding themselves either able to afford to insure their liabilities or that the likely timescales for reaching this point have materially shortened.
“This sets the stage for a busy period across the risk transfer spaces as schemes look to prepare and complete transactions. We continue to see considered preparations and collaboration between trustees, sponsors, advisers, and insurers being key to capturing market opportunities.”