Demand for buy-ins is set to triple over the next decade as more defined benefit (DB) schemes look to offload their liabilities to insurers.
Around £350bn of buy-in transactions will take place by 2026, three times the current level of demand, according to Hymans Robertson research.
It found demand from schemes to do buy-ins will likely outstrip the capacity of insurers, over the medium term at least.
The research, which comes on the back of a survey of all FTSE 350 sponsored DB schemes, also finds the demand will surpass supply by £125bn.
The calculation is based on an estimated 5% annual increase in insurer capacity, which would equate to £225bn of supply. Even with a 10% annual growth over the next ten years, the consultancy said there will be a shortfall of £65bn.
Head of buyout solutions James Mullins said more schemes would be seeking bulk annuity deals as scheme finances continue to deteriorate.
"Scheme finances have been stretched over the past decade with the situation getting a lot worse post-Brexit."
As more schemes seek to do buy-ins, their demand for gilts increases so they can de-risk. The consultancy calculates schemes and insurers will look to buy over £300bn of additional gilts over the next decade.
It recently estimated that deficits had hit £1trn, due to gilt yields falling after the vote to leave the European Union. They were hit further when the Bank of England announced an interest rate cut to 0.25% and a £70bn programme of quantitative easing.
DB schemes were reluctant to sell their gilts to the Bank of England, despite receiving offers higher than the market average.
Mullins adds: "Rather than sitting tight and waiting for financial conditions to improve, trustees and sponsoring employers need to take proactive steps to chip away at the problem and capture opportunities to reduce risk in stages. Buy-ins are a key to this.
"With the added uncertainty and volatility that has emerged from the decision to leave the EU, we predict this will accelerate scheme de-risking strategies, moving schemes further along the road to becoming more resilient to risk."
Aviva Life & Pensions has concluded an £875m buy-in with its own staff pension scheme, following on from a similar transaction last year.
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