WTW forecasts record longevity & pension risk transfer in 2022

WTW forecasts record longevity & pension risk transfer in 2022

The market for pension threat transfer, throughout longevity swaps and bulk annuity plans, is forecast to see a bumper UK ₤ 65 billion of offers in 2022, with strong growth on the durability swap side prepared for, according to WTW (Willis Towers Watson), while more third-party capital participation is likewise expected.In 2021, we taped ₤ 12.7 billion of UK focused pension scheme longevity swap plans, all of which are recorded in our longevity swaps and risk transfer Deal Directory.
However, broker Aon stated prior to the end of the year that it prepared for durability swap volumes would reach ₤ 15 billion, once all deals done last year were reported. This suggests there might still be a fairly sized transaction revealed quickly, although we can not verify that yet.
WTW, on the other hand, thinks that nearly ₤ 20 billion of durability swaps were seen in 2021, which recommends there was a significant amount of private deal-flow as well.
Competitively priced insurance coverage and reinsurance capability helped to drive a hectic year in 2021 for the longevity threat transfer and pension de-risking market in the UK.
Competitive prices from insurance companies was a major driver again as more well-funded plans looked for to conclude their journey plan by de-risking their liabilities in the insurance market.
” 2021 was a year of sped up activity, beginning gradually however ending up 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 group. “The consistently excellent pricing were seeing for customers has actually been mainly due to increased allowances to illiquid assets in insurance providers financial investment techniques, but also because of better longevity rates in the reinsurance market. There has actually likewise been a lot of innovation in the market this year, consisting of the very first longevity swap to cover mainly deferred members.”
WTW is expecting an even busier year in 2022, with ₤ 25 billion of longevity swap activity prepared for and another ₤ 40 billion of bulk annuities, totalling ₤ 65 billion and representing strong development from 2021s approximately ₤ 50 billion quote by WTW.
That will be a record year, if all the stars line up and market conditions remain favorable to getting the offers done that pensions are seeking in 2022.
WTW states that, according to its research, around a 3rd of pension schemes are looking to de-risk their liabilities in the next three years, with 2022 expected to be a peak year since of continued competitive market rates, pent-up need from the pandemic and competitors between insurance and reinsurance firms that are aiming to fill their expanded targets.
While competitive prices has assisted to keep the longevity market the domain of the traditional insurance coverage and reinsurance market, in the main, there is space for additional capital to support the market and with a record year ahead, WTW thinks we will see some more third-party capital activity.
Scaife commented, “We know that the marketplace conditions are most likely to be favourable this year and the demand from pensions schemes exists, which is why were anticipating 2022 to be the most significant ever year for pension scheme de-risking across both bulk annuity and longevity swap markets. The ₤ 40bn of buy-ins and buyouts were expecting are most likely to be from repeat deals along with brand-new pension plans coming to market.
” We are likewise anticipating the gradual trend towards complete buyouts to continue, as schemes mature and financing levels enhance, however also as PPF+ cases total deals. In these hectic market conditions we anticipate reinsurers and insurance providers to end up being more selective about which opportunities they will devote resources to, with plans needing to be flexible on timescales if they wish to maximise competitors.
” For Trustees, more than ever, the focus will be on the security of member benefits, the member experience and an increased concentrate on Environmental Social and Governance (ESG) concerns when choosing a supplier for bulk annuities and longevity swaps. With more options now available to plans, because the approval of the UKs first superfund, Trustees will anticipate their insurance coverage partners to demonstrate how they will supply monetary security, along with a commitment to making sure an excellent member experience through modern and in shape for purpose administration, clear interactions and detailed transition planning.”
One trend we will be looking out for, is a prediction that the pension de-risking market will see more ingenious methods to bring capital to support pensions requirements, including from third-party investor sources.
So it is not expected to be all conventional insurance and reinsurance capital supporting a record year of durability and pension danger transfer, WTW says that “we will likewise see innovative ways to allocate capital to the specified benefit pensions market, including the development in 3rd party capital offerings and superfunds.”
Check out lots of historical durability swap and reinsurance deals in our Longevity Risk Transfer Deal Directory.

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