UK - The pension scheme risk transfer market is set to grow a further £20bn ($32bn) over the next 18 months, Hymans Robertson figures predict.
The consultant's Managing Pension Scheme Risk Report Q4 2010 predicted the total value of risk transfer deals will hit £50bn before the end of 2012 - with several multi-billion pound deals expected to complete during this year.
It said since the risk transfer market took off in 2006 insurance companies and banks have taken on the risks associated with about £30bn of scheme liabilities.
Hymans Robertson head of buyout solutions James Mullins (pictured) said: "Our analysis illustrates that it won't be long before £50bn of pension scheme risk has been transferred to insurance companies and banks. 2010 was the third successive year during which £8bn of pension scheme risks were transferred via buy-ins, buyouts and longevity swap deals. 2011 is likely to see a substantial increase above these levels."
Meanwhile, last year saw a total of £8.2bn of risk transfer deals, made up of £5.2bn of buy-ins and buyouts and about £3bn of longevity swaps. The value of buy-ins was more than five times that of buyouts during 2010, while there were no longevity swap deals struck in Q4 last year.
And Hymans Robertson predicted one-in-four FTSE100 companies will complete a material pension scheme risk transfer deal before the end of 2012.
GlaxoSmithKline's £892m buy-in with Prudential during Q4 last year became the tenth FTSE100 company to complete a material risk transfer deal for its scheme.
Mullins said: "This is due to a number of drivers. One is that market conditions have improved over the last year. Coupled with the change to the CPI inflation measure, this means that risk transfer deals are more affordable for many UK pension schemes."
The market for buy-in/buyouts during 2010 was dominated by Rothesay Life, Aviva, Prudential Pension Insurance Corporation, Legal & General, MetLife and Lucida. Rothesay Life led the field with over 25% of market share, by value, during 2010, owing to its £1.3bn buy-in with British Airways in July last year.
Pension Insurance Corporation co-head of business origination David Collinson said £20bn over the next 18 months might be a bit of a stretch, but somewhere between £10bn and £20bn in the market would be entirely feasible.
He added: "We are seeing a number of event driven buyouts where it becomes the only option, where it is an M&A deal or insolvency. But there are a number of large pension schemes looking to buy out as well."
Last week, research by JLT Pension Capital Strategies found buyout deals totalled £8.1bn last year, with £1.6bn of this business written in Q4 alone.
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