British pension insurance deals totalled 45 billion pounds ($56.03 billion) in 2024, with 40 billion to 50 billion pounds in deals expected this year along with new entrants into the sector, adviser LCP said in a report on Thursday.
Life insurers such as Aviva, Legal & General and Phoenix have expanded in recent years into the profitable market for bulk annuities – insurance for corporate defined benefit, or final salary, pension schemes – with companies eager to offload pension scheme risk from their balance sheets.
Bulk annuity deal volume hit a record 49 billion pounds in 2023, according to LCP data.
The sector has attracted recent entrants Royal London and Utmost, backed by Oaktree Capital.
LCP said it expected at least one further new insurer entrant this year. LCP did not name the insurer but said that private equity firm Brookfield was last year reported to be establishing an insurance company to enter the market.
Brookfield did not immediately respond to a request for comment.
LCP said it was having discussions “with a range of potential entrants and investors” in the bulk annuity market and it also expected a new pension superfund provider this year.
Pension superfunds are an alternative to insurance for pension schemes which cannot afford a bulk annuity. Clara-Pensions is currently the only superfund provider.
Some employers are, however, preferring to keep pension schemes on their books, as higher interest rates have propelled more of them into surplus, industry sources say.
The Bank of England has also warned about the risks of funded reinsurance, or FundedRe – reinsurance for bulk annuity deals which is provided by overseas players, sometimes backed by private equity.
FundedRe currently makes up around 10% of bulk annuity transactions, according to Adolfo Aponte, managing director at pensions adviser Cardano.
The risk is that this proportion could grow if the bulk annuity market expands, industry sources add. Regulators are worried about counterparty risk from FundedRe providers in the event of a market crisis.
($1 = 0.8031 pounds)
(Reporting by Carolyn Cohn and Iain Withers）
