Pension scheme buy-ins/buy-outs (c£160bn) and longevity swaps (c£90bn) have now insured £0.25 trillion of longevity risk since the market took off in 2007, according to new analysis from Hymans Robertson. 

As set out in the firm’s latest half yearly risk transfer market report, the leading pensions and financial services consultancy also found that in 2019 alone:

• pension scheme buy-in and buy-out transactions totalled £43.8bn, smashing the previous record of £24.2bn in 2018;
• there were 153 buy-in and buy-out transactions at an average transaction size of £286m, an increase of 39% on the 2018 average of £206m;
• there were five buy-in and buy-out transactions over £3bn each, whereas there had only ever been one transaction in that size range before 2019; and
• just three insurance companies (Rothesay Life, Legal & General and Pension Insurance Corporation) completed over 75% of all buy-in and buy-out transactions, equivalent to £34bn.

James Mullins, head of risk transfer at Hymans Robertson comments:

“The last decade saw the market for pension scheme buy-ins and buy-outs truly come of age as it grew from relative infancy to the impressive £43.8bn of premiums we saw written in 2019. An eight-fold increase compared to 2010.

“There were five buy-in and buy-out transactions that were each over £3bn in 2019 (Allied Domecq, Asda, British American Tobacco and Rolls Royce, telent), compared with only one such transaction ever occurring in prior years and inevitably these mega transactions hit the headlines. However, interestingly the smaller transactions of less than £1bn each still accounted for around £15bn of buy-ins and buy-outs during 2019 alone, which is a further sign of how this market is maturing.

“The UK pension scheme risk transfer market is leading the world in terms of volume, maturity and innovation, with around £0.25 trillion of pension scheme longevity risk now having been insured via buy-ins, buy-outs and longevity swaps.  To put that into context, that means that the longevity risk associated with around 15% of all defined benefit pension scheme liabilities in the UK has now been insured, up from just 1% ten years ago. Pension scheme risk transfer is developing rapidly in other countries too, such as the USA, Netherlands and Canada and those countries are watching with interest how the market develops in the UK.”