Buyout market volumes recover after slow start
Pardon the Interruption
This article is just an example of the content available to mallowstreet members.
On average over 150 pieces of new content are published from across the industry per month on mallowstreet. Members get access to the latest developments, industry views and a range of in-depth research.
All the content on mallowstreet is accredited for CPD by the PMI and is available to trustees for free.
Bulk annuity market volumes for this year are thought to be around £30bn, despite just £7.7bn of transactions being written in the first half of the year, but consultants predict that higher activity since then will continue into 2022.
The 2021 total will be close to levels reached in 2020, the second busiest year on record, although it will not reach the levels of 2019, when about £41bn of transactions was written thanks to several mega deals.
The 2021 total will be close to levels reached in 2020, the second busiest year on record, although it will not reach the levels of 2019, when about £41bn of transactions was written thanks to several mega deals.
Analysis from consulting firm Barnett Waddingham shows some schemes and sponsoring employees appear to have been affected by the pandemic, meaning they made less progress in their planning and preparations for a buy-in or buyout which would otherwise have hit the market in the early part of 2021.
The slow start to the year means a number of insurers may not have fully reached their goals from the beginning of the year, potentially increasing appetite now and in early 2022, the firm predicts.
“The pipeline of business for 2022 from schemes seeking to insure their liabilities already looks very healthy," said Gavin Markham, head of bulk annuity consulting at Barnett Waddingham, but warned of continuing headwinds from Covid-19 and Brexit.
The slow start to the year means a number of insurers may not have fully reached their goals from the beginning of the year, potentially increasing appetite now and in early 2022, the firm predicts.
“The pipeline of business for 2022 from schemes seeking to insure their liabilities already looks very healthy," said Gavin Markham, head of bulk annuity consulting at Barnett Waddingham, but warned of continuing headwinds from Covid-19 and Brexit.
“Future demand will inevitably come from a significantly greater number of schemes," said Markham, adding that to achieve the best transaction outcome in what is set to be an increasingly busy market in the years to come, schemes must be well-prepared.
Other findings from the firm's analysis shows that pensioner buy-in pricing has returned to more typical pre-pandemic margins above gilts after a spike in credit spreads in spring 2020.
The analaysis also shows that a significant proportion of schemes are expected to reach buyout funding over the next 10 years. Those with a higher exposure to risk assets have seen funding levels increase substantially.
Other findings from the firm's analysis shows that pensioner buy-in pricing has returned to more typical pre-pandemic margins above gilts after a spike in credit spreads in spring 2020.
The analaysis also shows that a significant proportion of schemes are expected to reach buyout funding over the next 10 years. Those with a higher exposure to risk assets have seen funding levels increase substantially.
