Small schemes are facing “obvious challenges” in grabbing insurer attention as “jumbo” deals are beginning to typify the bulk annuity market, Aon says.
This year has seen a surge in the number of £1bn-plus transactions, with eight deals insuring more liabilities between them than any full-year previously, the consultancy said, including last week's £3.8bn buy-in between Asda and Rothesay Life.
While there have been £34.6bn of bulk annuity transactions announced so far this year, these eight transactions have all insured more than £1bn of liabilities each.
With a combined value of £25.4bn, the volumes exceed last year's record-breaking total of £24.2bn - but this total covered more than 160 transactions.
Aon said it is likely further large transactions would be confirmed before the end of the year, with insurers already lining up similar deals for the start of 2020.
It noted the £4.7bn Telent buy-in, which is the largest bulk annuity in the market to date, as well as the £2.8bn buy-in for the National Grid UK Pension Scheme, the largest scheme to use buy-ins to manage risk.
Of the five largest transactions ever completed in the market, four were conducted this year, also including the £4.6bn buyout of the Rolls-Royce (UK) Pension Fund, which was the largest ever deal when it was announced.
Aon partner Mike Edwards said: "These transactions demonstrate the growing scope in the market for large pension schemes to implement bespoke de-risking solutions - a situation that is increasingly prompting others to follow suit.
"We have observed a significant shift in 2019 with the market for large transactions becoming increasingly dynamic, and - as we have always suggested - schemes needing to be prepared to respond ever more quickly if they are to capture the best commercial opportunities."
But the focus on larger deals may be drawing insurer attention away from smaller schemes; most deals which are made public tend to be big in value or with well-known sponsors. Final insurer totals, expected in March next year, will confirm whether there has been a shift away from small schemes, or if the combined values so far are masking a high number of smaller deals.
Aon partner Stephen Purves recognised this, noting: "We are also cognisant of the implications for the rest of the market. Large transactions create obvious challenges by absorbing insurer capacity, so presenting deals to the insurers in the right way - often using streamlined approaches - will help smaller schemes compete for insurer attention in a busy marketplace."
See also: The biggest buy-ins and buyouts
Just Group has completed a £74m pensioner buy-in with the UK pension scheme of a US-listed engineering business.
The Smiths Industries Pension Scheme has secured a £146m buy-in with Canada Life in its fourth bulk annuity and its sponsor’s tenth overall.
The Prudential Staff Pension Scheme has entered into a £3.7bn longevity swap with Pacific Life Re, insuring the longevity risk of over 20,000 pensioners.
The Baker Hughes (UK) Pension Plan has secured approximately £100m of liabilities through a buy-in with Just Group.
There have now been a total of 30 longevity swaps over £1bn publicly announced. The full list, provided by Willis Towers Watson and through PP research, is as follows...