Exclusive: FTSE 100 risk settlement transactions hit £70bn
FTSE 100 risk settlement transactions have reached £70bn as a third of these firms remove longevity risk, according to Aon.
The firm revealed 32 FTSE 100 companies have taken proactive steps to remove longevity risk through bulk annuity deals and longevity swaps.
While most companies have reached their de-risking aims via a pensioner buy-in or pensioner longevity swap, a number of the biggest listed companies are instead opting for a buyout. These include Rolls-Royce and Rentokil Initial.
Aon Risk Settlement Group partner John Baines said: "If we went back five or six years, the big deals being done by FTSE 100 companies were largely longevity swaps, and there wasn't anything near that size in the bulk annuity market and now it's much more balanced, which reflects the demand from pension schemes."
The volume of firms that have removed longevity risk - or taken steps towards doing so - is more than one third of those with defined benefit pension schemes.
As at 30 September, schemes that had carried out risk settlement transactions include Aviva, BT Group, National Grid, ITV, and HSBC.
Baines added: "The market can now handle bigger transactions and funding positions are improving. There's a push from shareholders and investors but there is also much more capacity in the market to allow schemes to do these transactions."
"Reaching £70bn of risk transfer is a significant landmark and is indicative of the increasing attention that pensions risks are getting at the most high-profile UK businesses."
Martin Bird, who is a senior partner in the firm's Risk Settlement Group added: "While there are clear differences which reflect the differing natures of the companies, we have also observed commonalities between these projects.
"Not least among these is the appeal to insurers of partnering with high profile organisations. This means that while attractive terms can be available, capturing them requires stakeholder collaboration, robust governance and a flexible approach."
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