Christian de Monte, Head of Insurance and Group Subsidiaries at Lloyds Banking Group, has suggested that higher interest rates, strong insurer capitalisation and growing market competition are supporting a robust pension risk transfer (PRT) pipeline, and creating compelling opportunities for pension schemes and sponsors.
“With interest rates higher than they were a few years ago, the PRT pipeline is strong, and crucially, insurers are very well capitalised and operating in an increasingly competitive market, which should translate into compelling risk transfer opportunities for pension schemes and sponsors,” said de Monte in a recent interview with Reinsurance News.
During the discussion, de Monte delved into a range of topical issues, including the key factors currently influencing insurer capacity from a balance-sheet perspective.
With UK pension risk transfer volumes expected to remain elevated in 2026, the executive noted that insurer capacity in the PRT market is “fundamentally” determined by capital efficiency and the ability to match long-duration liabilities with appropriately structured assets.
“The sustained improvement in defined benefit scheme funding levels, driven by higher interest rates in recent years, has brought a substantial pipeline of schemes to market,” de Monte added.
He continued, “A key point today is that insurers are currently very well capitalised and, therefore, well placed to absorb the PRT pipeline.
“We have also seen more recent entrants to the market, alongside changes in ownership and strategy among existing players – dynamics that we expect will support strong capacity and competitive demand for bulk annuity transactions.
“Taken together, these insurance market dynamics – high levels of capital and competition – should create compelling opportunities for pension schemes and sponsors considering risk transfer, both in terms of pricing tension and the ability to execute at scale.”
De Monte also discussed how collateral and liquidity considerations are shaping pricing and transaction structuring in the PRT market.
The executive continued, “Collateral and liquidity are becoming much more central to how insurers think about both pricing and deal structure.”
De Monte explained that this dynamic is being driven, among other factors, by insurers’ increasing appetite for credit and illiquid assets, which is reducing their relative holdings of gilts and cash as sources of liquidity.
Meanwhile, from a balance-sheet and execution perspective, the principal constraints reportedly relate to regulatory solvency requirements, the availability of suitable matching assets, and the maturity of insurers’ risk-management and liquidity frameworks.
“We are seeing insurers adapting to liquidity needs with increased focus on flexible collateral agreements (including broader use of corporate bond-eligible CSAs where appropriate) and securities financing solutions,” de Monte said.
Elsewhere in the interview, Lloyds Banking Group’s Head of Insurance discussed how firms are approaching the sourcing of long-dated assets, and where they are seeing constraints and opportunities in matching assets to liabilities.
De Monte observed that bulk annuity liabilities are long-term, often inflation-linked, and predictable in terms of cash flows, meaning insurers have a strong appetite for assets that closely match that profile.
According to the executive, the shift away from traditional fixed income and towards long-term, inflation-linked real assets in areas such as infrastructure, renewable energy and transport is continuing.
He added that these assets tend to offer the duration and cash flow characteristics insurers are seeking and, more broadly, support UK capital markets by channelling institutional capital into long-term productive investment.
“However, the availability of assets, at least in the UK, remains limited versus demand. The challenge can be supply as there is not always enough high-quality, investable infrastructure assets to meet demand,” de Monte added.
He went on, “More recently, the relative value of gilts and other sovereign bonds versus credit has seen a return of interest in that asset class. Given the long-term nature of their liabilities, insurers are able to adapt their investment portfolios to take advantage of market opportunities.
“As such, the focus on improving the efficiency and returns of their current portfolios has increased in recent years, alongside sourcing new matching assets.”
Notably, the executive also touched on how Solvency II and broader prudential regulation influence insurers’ capacity, capital efficiency and risk appetite for large-scale transactions.
De Monte affirmed that regulation is a major consideration in how insurers assess capacity and capital in this market.
He continued, “Frameworks like Solvency II push insurers towards long-duration, high-quality assets with predictable cash flows, which then shapes both how they invest and how they structure bulk annuity deals.
“Across the industry, there’s a clear focus on building the right infrastructure and governance to operate at scale within those constraints. Insurers that are investing in areas like asset solutions, collateral management, hedging and liquidity are generally better placed to take on larger transactions, while still meeting the standards regulators and policyholders expect.
“In practice, this is also reinforcing discipline around risk selection and ‘execution readiness’ – operational capability, governance and the ability to evidence robust risk management increasingly differentiate who can lead the biggest deals consistently.
“Where regulatory expectations evolve, insurers that can respond quickly without compromising policyholder security are best positioned to maintain strong pricing and reliable execution through the cycle.”
Closing the interview, the Lloyds Banking insurance leader discussed how scrutiny of funded reinsurance remains elevated, and how insurers are balancing the use of funded structures to enhance capacity while maintaining capital efficiency and meeting regulatory expectations.
De Monte concluded, “This is something the whole market is watching closely, including regulators. Funded reinsurance solutions continue to provide additional capacity, and insurers continue to be very selective on the counterparties they choose for such transactions, as well as the collateral and security they demand from providers as part of their agreements.
“What’s clear is that any sustainable growth in PRT capacity needs to be built on strong risk management and solid governance. The insurers that are taking a thoughtful approach by making sure their structures genuinely reflect the underlying economics and stand up to regulatory scrutiny are the ones best positioned to support the market’s growth over the long term.”
