Re/insurance broker Willis Towers Watson is expecting the bulk annuity market to return to ‘normal’ levels in 2020, with £30 billion worth of deals expected over the course of the year.
Down from an anticipated £40 billion in 2019, WTW says 2020 should see a more balanced market, allowing greater traction for smaller schemes and fewer ‘mega deals’.
Macro conditions, meanwhile, could drive market volatility, and may lead to opportunities for attractive pricing.
Willis Towers Watson expects a particularly busy start to 2020, as those schemes which weren’t able to secure deals in 2019 seek to lock down risk.
In addition, WTW says the longevity swap market is potentially due for a record year of hedging, breaking the record set in 2014, when £25bn was hedged.
WTW says this will reflect schemes looking to lock in current life expectancy assumptions, which are the lowest they have been in more than a decade.
“This year has seen a remarkable number of mega deals, so although we expect a reduction in the number of large deals through 2020, there is certainly lots of ‘pent up’ demand in both the longevity swap and bulk annuity markets,” said Ian Aley, Head of Willis Towers Watson’s Transactions team.
“Larger schemes should consider partnering with insurers to find optimal assets to match their liabilities. There is great opportunity for smaller schemes to find more traction in the market if they can focus on streamlining processes, with good preparation, governance and pre-agreed legal terms.”
