WTW forecasts record longevity & pension risk transfer in 2022

WTW forecasts record longevity & pension risk transfer in 2022

The marketplace for pension danger transfer, throughout durability swaps and bulk annuity plans, is anticipated to see a bumper UK ₤ 65 billion of offers in 2022, with strong development on the durability swap side expected, according to WTW (Willis Towers Watson), while more third-party capital involvement is also expected.In 2021, we taped ₤ 12.7 billion of UK focused pension scheme durability swap plans, all of which are taped in our durability swaps and run the risk of transfer Deal Directory.
Broker Aon stated just prior to the end of the year that it expected longevity swap volumes would reach ₤ 15 billion, as soon as all deals done last year were reported. This suggests there could still be a fairly sized transaction revealed quickly, although we can not verify that yet.
WTW, meanwhile, believes that almost ₤ 20 billion of longevity swaps were seen in 2021, which recommends there was a considerable quantity of personal deal-flow.
Competitively priced insurance and reinsurance capability helped to drive a busy year in 2021 for the durability threat transfer and pension de-risking market in the UK.
Competitive rates from insurers was a significant motorist once again as more well-funded plans looked for to conclude their journey plan by de-risking their liabilities in the insurance coverage market.
” 2021 was a year of accelerated activity, starting slowly however finishing with a grow, and we were pleased to have encouraged on every durability swap deal that was announced in the market last year,” discussed Sadie Scaife, Senior Director in WTWs Transactions team. “The consistently excellent rates were seeing for clients has been mostly due to increased allocations to illiquid properties in insurers investment strategies, however also since of better durability pricing in the reinsurance market. There has also been a great deal of development in the market this year, including the very first longevity swap to cover mainly deferred members.”
However WTW is expecting an even busier year in 2022, with ₤ 25 billion of longevity swap activity expected and another ₤ 40 billion of bulk annuities, amounting to ₤ 65 billion and representing strong growth from 2021s roughly ₤ 50 billion estimate by WTW.
That will be a record year, if all the stars line up and market conditions remain conducive to getting the deals done that pensions are seeking in 2022.
WTW states that, according to its research study, around a third of pension plans are looking to de-risk their liabilities in the next 3 years, with 2022 expected to be a peak year because of continued competitive market prices, suppressed need from the pandemic and competition between insurance and reinsurance firms that are aiming to fill their expanded targets.
While competitive pricing has helped to keep the longevity market the domain of the standard insurance and reinsurance market, in the main, there is space for additional capital to support the marketplace and with a record year ahead, WTW believes we will see some more third-party capital activity.
Scaife commented, “We understand that the marketplace conditions are most likely to be favourable this year and the need from pensions plans is there, which is why were forecasting 2022 to be the biggest ever year for pension plan de-risking across both bulk annuity and durability swap markets. The ₤ 40bn of buyouts and buy-ins were expecting are likely to be from repeat deals along with brand-new pension schemes coming to market.
” We are also anticipating the gradual trend towards full buyouts to continue, as plans mature and financing levels improve, however also as PPF+ cases complete deals. In these hectic market conditions we expect reinsurers and insurance companies to end up being more selective about which opportunities they will commit resources to, with plans requiring to be versatile on timescales if they wish to increase competitors.
” For Trustees, more than ever, the focus will be on the security of member benefits, the member experience and an increased focus on Environmental Social and Governance (ESG) problems when choosing a provider for bulk annuities and durability swaps. With more alternatives now readily available to plans, given that the approval of the UKs first superfund, Trustees will expect their insurance coverage partners to show how they will provide financial security, in addition to a dedication to guaranteeing an excellent member experience through healthy and modern-day for purpose administration, clear communications and in-depth transition planning.”
One trend we will be looking out for, is a forecast that the pension de-risking market will see more innovative methods to bring capital to support pensions requirements, consisting of from third-party financier sources.
So it is not expected to be all traditional insurance and reinsurance capital supporting a record year of longevity and pension danger transfer, WTW says that “we will also see ingenious ways to designate capital to the defined advantage pensions market, consisting of the development in 3rd party capital offerings and superfunds.”
Check out lots of historic longevity swap and reinsurance transactions in our Longevity Risk Transfer Deal Directory.

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