United Kingdom

Aon says continued big annuity deals point to another record year

Risk Settlement Market 2019 report reveals drivers for continued demand

LONDON (15 August 2019) – Aon, (NYSE:AON) a leading global professional services firm providing a broad range of risk, retirement and health solutions, has said that given the deals already transacted and those in the offing, the UK bulk annuity market could well exceed £35 billion in 2019 - and possibly even surpass the £40 billion mark. This comes as Aon publishes its Risk Settlement Market 2019 report, which looks back at the past year and highlights the top trends driving this year’s market.

Martin Bird, senior partner and head of risk settlement at Aon, said:
“This is shaping into another good year for pension schemes looking to use insurance to de-risk. More schemes are improving their funding levels and insurers are providing exceptional pricing. There is also better sourcing of illiquid assets, increased competition and strong capacity from global reinsurers. All this is providing key capacity for the annuity market.

“We have already seen close to £18 billion of business placed in the first half of this year – including the largest ever UK bulk annuity completed by Rolls-Royce – all of which underlines the appetite of the insurance market. We expect to see more large-scale deals during the second half of 2019 – and that could carry the total amount of deals to between £35-40 billion or more.”

Mike Edwards, partner in Aon’s risk settlement group said:
“To make this all happen, many of the fundamentals of the market remain the same. It is still crucial for schemes of all sizes to do the preparatory leg work and to be able to articulate very clear objectives to insurers when they approach the market to secure the best deals.

“The market is also developing; in 2019 we are seeing increased appetite from sponsors and trustees to secure members’ benefits in full - which presents both new challenges and opportunities for insurers. Schemes need to be alive to this and to other wider market dynamics when designing and going through their own transaction process. We expect more situations in which bulk annuity negotiations are complemented with member options exercises which can deliver the best outcomes for all.”

Key highlights and themes outlined in Risk Settlement Market 2019, include:

  • 2018 was a record-breaking year for the UK bulk annuity market with over £35bn of business placed.
  • The market was dominated by large transactions, with the biggest insurers writing their largest volume of bulk annuities to date.
  • The smaller end of the market, especially transactions under £30 million, was also active, boosted by attractive pricing.
  • Advance preparation, close monitoring of the market and flexibility over the timing and manner of the deal completion remain key for successful conversion.
  • Aon worked with insurers to develop a new ‘Streamlined Compass’ approach for smaller transactions, aimed at maximising insurer engagement and delivering the best possible pricing.
  • 2019 is set to be another record year for the market, with more multi-billion pounds deals. The first half of the year saw the largest ever UK buyout – the £4.6bn Rolls-Royce UK Pension Fund partial buyout – for which Aon was a lead adviser to the trustees.

Risk Settlement Market 2019 is available here

Notes to Editors

About Aon

Aon plc (NYSE:AON) is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our 50,000 colleagues in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance.

Aon announced in May 2018 it will retire the business unit brands of Aon Benfield and Aon Risk Solutions, which follows the retirement of the Aon Hewitt business unit brand in 2017. This move was designed to increase the rate of innovation across the firm and make it easier for colleagues to work together to bring the best of Aon to clients. Aon has five specific global solution lines: Commercial Risk Solutions, Reinsurance Solutions, Retirement Solutions, Health Solutions and Data & Analytic Services.

Follow Aon on Twitter: @AonRetirementUK

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