Final figures from the bulk annuity insurance market show that value and number of these deals fell slightly during 2020, but industry experts say they expect this to increase again, following the pandemic.
They point out that the total value of these transfers is still high when compared to previous years, reflecting structural changes in this market.
The total value of buy-ins and buy-outs last year as £31.3bn, covering 140 transactions. This was less than the 153 transaction seen in 2019, with a value of £43.8bn.
The average buy-in/ buy-out size in 2020 was £224m. This compares to £286m in 2019.
Around 80 per cent of these deals — amounting to some £25bn — was transacted by four of the eight insurers in the market: Legal & General, Rothesay, Aviva and Pension Insurance Corporation.
Longevity swaps in 2020 cover £24.1bn of liability across eight transaction. This was higher than the £10.8bn across three transactions seen in 2019.
Hymans Robertson head of risk transfer James Mullins says: “Buy-ins and buy-outs and longevity swaps have now insured £300bn of risk from DB pension schemes in the last 14 years, since this market took off in 2007.
“Interestingly, over half of that amount (over £150bn) has been transacted in just the last four years, which is a clear sign of the acceleration of growth in this market.
“Our projections show that we expect to see over £40bn of buy-ins and buy-outs on average over the next 10 years. In 2020 the transactions were heavily weighted towards buy-ins, as opposed to buy-outs. However, over the next few years we expect to see a significant increase in the number of buy-outs as more pension schemes are seeing their funding levels improve.”
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