The high numbers of transactions are projected to draw a number of new insurers into the bulk annuity market.
Hymans Robertson notes that new entries provide trustees more discretion, but they also bring up certain issues. It is anticipated that in 2023 and the following years, transaction records in the risk transfer market will be broken.
Hymans emphasises that insurers not presently engaged in the market are paying attention to the opportunities arising from this heightened demand. In 2023, M&G returned to the bulk annuity market, becoming the first new player since 2017.
Hymans Robertson partner and head of alternative risk transfer Iain Pearce says: “Trustees will have even more insurers to consider when assessing newer entrants alongside established providers. Trustees are already typically assessing insurers on a much wider range of capabilities than when many of the now established insurers joined the market. These include financial strength, ESG factors, administration capacity and quality, buy-out capabilities, and brand awareness.
“It’s therefore no longer enough for a new entrant to simply be willing to write long-term pensioner buy-ins at lower margins to get a foothold in the market. Insurers need to show their capabilities in a range of areas, and work hard to give as much assurance as possible to back up their business plans and promises. Trustees’ strong views on these areas will influence whether a newer entrant is seen as the right counterparty for their pension schemes.
“Trustees that spend time considering whether and how to talk to new entrants are likely to get the most engagement. They may also benefit from some motivated providers who are looking to get a foothold in the market. This ‘early mover’ advantage could result in preferable contractual or commercial positions.
“Trustees should consider whether their circumstances and priorities mean that they should approach a new entrant for quotations. Planning will ensure trustees have the information they need to make decisions, and will let their pension schemes quickly lock in if they receive attractive pricing.”
