According to James Mullins, Partner and Head of Risk Transfer, Hymans Robertson, 2024 is already shaping up to be a year of “unprecedented change” for the risk transfer market, with a host of opportunities being presented for the “well-prepared” pension schemes.
“For example, we expect to see two new entrants competing for buy-in transactions by the middle of 2024. This will further increase competition for smaller and medium-sized pension schemes,” Mullins explained in Hymans Robertson’s annual risk transfer report.
Mullins observed an ‘early mover’ advantage for the first few pension schemes to transact with a new entrant in the buy-in market, “as the insurer accepts a lower margin to help build up its credibility”.
He continued, “At the larger, multi-billion pound end of the market, more insurers are demonstrating that they have the capability and appetite to complete record-breaking transaction sizes.
“Insurers also currently have access to a large amount of capital, which increases their capacity for transactions of all sizes. This gives the potential for all insurers to complete record transaction volumes during 2024.”
According to Mullins, 2023 saw the first superfund transaction, with more in the pipeline in 2024. He said that this, along with increased activity for capital-backed journey plans, has given the firm reason to see 2024 as a “coming of age” year for the alternative risk transfer market.
He added, “We also expect to see more use of innovation, such as captive insurance solutions. These allow the sponsoring employer to benefit as the pension scheme runs-off within an insurance wrapper.
“So, if last year’s story was about the rapid increase in demand from pension schemes, this year’s will be about increased supply from the insurers and alternative risk transfer providers.”
Mullins concluded, “Existing and new insurers have geared up well for at least £50bn a year being the new normal for buy-in volumes. Indeed, our projections indicate that buy-in volumes will be at least £50bn every year for the remainder of the decade.
“To meet this increased demand and in preparation for these changes, we grew our team by a third last year and have now led risk transfer transactions totalling over £30bn, including 25 transactions with FTSE100 sponsors.”
