Pension Insurance

News and Views

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News and views (March 2014)

Looking forward to 2014

  • Appetite amongst companies and trustees looks set to remain strong and 2014 is gearing up to be another significant year in the buyout market.
  • As mentioned, it is possible that we will see new entrants to this market in 2014.
  • The market for enhanced buy-ins looks set to continue to grow in 2014.  Recent developments, such as the standardisation of data collection for the medical underwriting process, should make the process for obtaining quotes easier.
  • We continue to see new solutions and  innovation in the market meaning the insurance solutions are becoming a realistic prospect for a wider range of schemes in different circumstances.

2013 in review

  • With the start of the market for enhanced buy-ins, several large longevity only deals as well as the more traditional buy-ins and buyouts, 2013 was an important year for the pensions insurance market.

Deals done

  • 2013 saw the country’s largest ever bulk annuity deal, when EMI Group Pension Fund agreed a £1.5bn  buyout of the liabilities for all 20,000 of its members with Pension Insurance Corporation.
  • Similar to 2012, there were points in 2013 where pensioner buy-ins were available with an implied yield close to that available on gilts, effectively meaning that schemes were able to exchange their gilt holdings for a buy-in and so obtain longevity hedging for nothing.
  • Several large longevity only deals transacted over 2014. The largest was the BAE deal with L&G with covered £3.2bn of longevity risk.  Deutsche Bank also agreed significant transactions with AstraZeneca, Carillion and Bentley.
  • In addition to arranging bespoke longevity swaps, Deutsche bank launched a longevity index product aimed at reducing the costs and complexities associated with longevity hedging. Although the index will not hedge a scheme’s longevity experience precisely (as it is not based on the mortality experience of the scheme’s population), it may help to open up the market to smaller schemes.
  • The market for enhanced buy-ins began to develop over 2013 with Partnership, Just Retirement, L&G and Aviva all quoting actively. Several transactions were announced over the course of the year with Partnership agreeing the largest.

Providers

  • With the exception of the developments in the enhanced buy-in market, there were few changes in terms of the insurers who participate in the insurance market over 2013.
  • However, in February 2014 Rothesay Life announced that it would be purchasing Metlife’s bulk annuity business for an undisclosed sum.