Buy-in and buyout volumes in the first half of 2023 surpassed the record level set in 2019, according to analysis conducted by Lane Clark & Peacock (LCP).
The consultancy’s research, which analysed the H1 2023 financial results of six of the eight insurers active in the market and the publicly disclosed transactions of Pension Insurance Corporation (PIC) and Standard Life, found total risk transfer volumes for the first half of the year reached at least £20.2bn. The figure exceeds the previous record of £17.6bn which was set in 2019 and is nearly double the £12bn reached in 2022.
The firm said these figures represent the highest H1 volumes ever.
The analysis found the market in the first half of the year was dominated by five transactions which were valued at over £1bn, including the record-breaking £6.5bn buy-in between the two defined benefit (DB) schemes sponsored by the RSA Group and PIC. LCP said it anticipated this trend in the market would continue into the second half of the year with the record of ten transactions valued at over £1bn – also set in 2019 – expected to be overtaken by the end of the year.
Source: LCP (based on insurance company data)
LCP also noted the £2.7bn buy-in between the British Steel Pension Scheme and Legal & General represents the largest full insurance of a UK scheme. It also noted that as a result of improved DB funding levels, schemes were in an increasingly secure position where they could move directly to full insurance.
The firm’s research also found so far this year, three longevity swaps covering £8.3bn in liabilities had been completed, including the £5bn longevity swap agreed earlier this month between the BT Pension Scheme and Reinsurance Group of America.
Source: LCP
Partner Imogen Cothay said: “Our report last October anticipated a big increase in demand for buy-ins/outs in 2023 and that is exactly what we have seen. The UK risk transfer market has never been so busy with record-breaking volumes of over £20bn in the first half of the year.
“This is creating capacity crunches across the market, with insurers forced to be selective on which transaction opportunities to pursue. We carried out a major expansion of our specialist advisory team last year, giving us capacity to manage multiple large transactions – such as the record-breaking deals for RSA and British Steel earlier this year.
“Schemes need to get a grip on their endgame strategies and ensure they have the right support to seize the opportunities in this market.”
Principal Ruth Ward added: “In the near-term, the spike in demand for buy-ins/outs, driven by rapid funding improvements for many schemes, is testing insurer capacities. Focused and high-quality preparation and a clear journey plan have never been more important when approaching the market.
“Despite these pressures, it’s reassuring to see strong insurer engagement with no evidence of price hardening for the deals that we’re bringing to market.”
