Re/insurance broker Aon has reported a rise in the number of smaller bulk annuity transactions due to favourable market dynamics over the first half of 2020.
According to analysts at Aon, sub-£100 million transactions increased by 20% over H1 compared to the same period last year, and the firm expects this trend to continue through the rest of the year.
The increase was attributed to fewer jumbo transactions in the market compared to last year, which has meant insurers have had more capital and manpower to deploy across a wider spectrum of transactions
Also, smaller transactions have been helped by the use of streamlined auction processes, Aon said, which have been particularly important during recent volatile market conditions.
Finally, investment in technology and operational capacity at the smaller end of the market has helped to increase supply for smaller schemes looking to de-risk.
“There has been a misconception that smaller schemes struggle to access competitive pricing from insurers, so it is really pleasing to see them taking advantage of these market opportunities and transacting in the first half of 2020,” said Stephen Purves, partner at Aon. “Attractive insurer pricing and increased insurer capacity for well-prepared schemes has completed the picture.”
“A number of factors, including the impact of COVID-19, market volatility and an increased insurer capacity, have led to many more smaller transactions taking place. This is particularly so when compared to recent years in which larger transactions have dominated – and maybe it has changed the perception of the sort of schemes that should and can come to market,” Purves continued.
“Looking ahead, insurers are expecting this activity at the smaller end of the market to continue through to the end of the year. It’s clear that they are placing increased importance on good scheme preparation to maximise their interest and to ensure schemes are ready to trade when opportunities arise.”
