Aon, a risk management and professional services firm, has provided its 2024 UK Risk Settlement Market Update, highlighting a year of significant milestones for the bulk annuity and longevity swap markets.
According to the report, the UK bulk annuity market witnessed exceptional activity in 2024, setting new records in both transaction volume and deal numbers.
The total volume of bulk annuities reached £47.6 billion, with 293 deals transacted, far surpassing the previous record of 227 deals in 2023.
The second half of 2024 was particularly remarkable, with £32.5 billion in transactions completed—an all-time high for any six-month period.
Notably, 12 deals over £1 billion each were completed in the second half of 2024, a record number for any half-year.
Aon notes that this surge was driven by a combination of factors, including strong reinsurance market capacity, significant insurer solvency surpluses, and product innovations such as streamlined pricing offerings, which made transactions more accessible for smaller schemes.
Approximately 78 percent of the deals completed in 2024 were under £100 million, indicating a broad market capacity to cater to schemes of all sizes.
The longevity swap market, while slightly quieter than in previous years, still saw £5.8 billion in transactions in 2024. This was lower than in recent years, primarily due to smaller transactions, with two deals valued around £400 million each.
However, as funding positions remained strong, many pension schemes opted for bulk annuities instead. Despite the decrease in volume, the longevity swap market is expected to rebound in 2025, with volumes likely to exceed £15 billion by year-end, driven by ongoing transactions such as those involving the BT Pension Scheme and two Lloyds Banking Group pension schemes.
This trend also highlights the increasing ability of longevity swaps to hedge non-pensioner liabilities in addition to the traditional focus on in-payment risks.
Aon’s report also highlights the increasing trend of restructuring existing longevity swaps in 2024. Specifically, several previously executed longevity swaps were successfully converted into bulk annuities, driven by evolving scheme objectives and circumstances.
In addition to these developments, Aon’s analysis reveals a shift in the dynamics of the bulk annuity market, with the entry of new insurers such as Utmost and the re-entry of M&G, expanding competition and providing further capacity to the market.
Just Group wrote over 40 percent of all transactions in 2024. Aon’s report also highlights the growing activity within the Superfund market, with Clara being a key player in this space.
Clara successfully completed its £600 million transaction with the Debenhams Retirement Scheme, which included restoring full benefits for 10,400 members.
Additionally, Clara made its first deal with an active business, the £230 million Wates Pension Fund transaction. This trend demonstrates that Superfunds are becoming increasingly viable for a wider range of pension schemes, including those with active sponsors, and is expected to drive interest from trustees and sponsors looking for alternatives to traditional insurance solutions.
