2024 to be a year of unprecedented change for the risk transfer market

• New entrants will mean there are two new insurers competing for buy-ins by mid-2024

• Some existing buy-in insurers are expected to change ownership

• 2024 expected to be another record year for buy-in volumes, exceeding £50bn in 2023

• £50bn a year will be the new normal for buy-in volumes, with the market expected to be at least that level until 2030

• The market will see a record volume of multi-billion pound transactions

• The alternative risk transfer market will come of age in 2024, with more superfund transactions and a broader range of established options for pension schemes

• Increased use of innovative approaches expected, such as more captive insurance solutions

2024 will be a year of unprecedented change for the risk transfer market, says Hymans Robertson as it issues its annual risk transfer report today. The leading pensions and financial services consultancy’s report expects 2024 to see more insurers competing for buy-ins, with a record volume of multi-billion pound transactions and more use of alternative risk transfer options and captive insurance solutions. These changes represent excellent opportunities for well-prepared pension schemes of all sizes, as there will be more competition at both the large and smaller ends of the market. There will also be a greater variety of established risk transfer options for pension schemes to choose between, helping to solve different endgame objectives.

Commenting on the findings from the risk transfer report, James Mullins, Partner and Head of Risk Transfer, Hymans Robertson says:

“2024 is already shaping up to be a year of unprecedented change for the risk transfer market, which is presenting opportunities for well-prepared pension schemes. For example, we expect to see two new entrants competing for buy-in transactions by the middle of 2024. This will further increase competition for smaller and medium-sized pension schemes. In addition, there is an ‘early mover’ advantage for the first few pension schemes to transact with a new entrant in the buy-in market, as the insurer accepts a lower margin to help build up its credibility.

“At the larger, multi-billion pound end of the market, more insurers are demonstrating that they have the capability and appetite to complete record-breaking transaction sizes. Insurers also currently have access to a large amount of capital, which increases their capacity for transactions of all sizes. This gives the potential for all insurers to complete record transaction volumes during 2024.

“2023 saw the first superfund transaction and we expect to see more in 2024. This, along with increased activity for capital backed journey plans, means that we expect 2024 to be seen as a coming of age for the alternative risk transfer market. We also expect to see more use of innovation, such as captive insurance solutions. These allow the sponsoring employer to benefit as the pension scheme runs-off within an insurance wrapper.

“So, if last year’s story was about the rapid increase in demand from pension schemes, this year’s will be about increased supply from the insurers and alternative risk transfer providers.

“Existing and new insurers have geared up well for at least £50bn a year being the new normal for buy-in volumes. Indeed, our projections indicate that buy-in volumes will be at least £50bn every year for the remainder of the decade.

“To meet this increased demand and in preparation for these changes, we grew our team by a third last year and have now led risk transfer transactions totalling over £30bn, including 25 transactions with FTSE100 sponsors.”

The report also includes Hyman Robertsons’ expert insights on longevity risk, how trustees can compare insurers from an ESG perspective, and what affect the Solvency UK reforms are expected to have on the insurance market.

Hyman Robertson’s Risk Transfer Report 2024 can be read here.