New entrants to the bulk annuity market mean more choice for trustees

A number of new insurers are expected to enter the bulk annuity market, attracted by the record-breaking numbers and volumes of transactions.  New entrants give more power of choice to trustees, but also raise some questions, says Hymans Robertson.  Transaction records in the risk transfer market are expected to be broken in 2023 and the years to come.  The leading pensions and financial services consultancy emphasised that the opportunities brought by such strong demand are attracting the attention of insurers that are not already in the market.  M&G re-entered the bulk annuity market in 2023, making it the first new entrant since 2017*.

Commenting on the risk transfer market’s transformed landscape for trustees, Iain Pearce, Partner and Head of Alternative Risk Transfer, Hymans Robertson, said:

“Trustees will have even more insurers to consider when assessing newer entrants alongside established providers.  Trustees are already typically assessing insurers on a much wider range of capabilities than when many of the now established insurers joined the market.  These include financial strength, ESG factors, administration capacity and quality, buy-out capabilities, and brand awareness.

“It’s therefore no longer enough for a new entrant to simply be willing to write long-term pensioner buy-ins at lower margins to get a foothold in the market.  Insurers need to show their capabilities in a range of areas, and work hard to give as much assurance as possible to back up their business plans and promises.  Trustees’ strong views on these areas will influence whether a newer entrant is seen as the right counterparty for their pension schemes. 

“Trustees that spend time considering whether and how to talk to new entrants are likely to get the most engagement.  They may also benefit from some motivated providers who are looking to get a foothold in the market. This ‘early mover’ advantage could result in preferable contractual or commercial positions.

“Trustees should consider whether their circumstances and priorities mean that they should approach a new entrant for quotations.  Planning will ensure trustees have the information they need to make decisions, and will let their pension schemes quickly lock in if they receive attractive pricing.”

Hymans Robertson’s paper What new entrants mean for the bulk annuity market can be read here.

*At the time of writing, M&G has completed two buy-ins of similar size totalling around £600m, the first with the M&G Group Pension Scheme and the second with the Northern Bank Pension Scheme.