A third of the FTSE100 has now removed longevity risk
LONDON (9 October 2019) - Aon plc (NYSE:AON), a leading global professional services firm providing a broad range of risk, retirement and health solutions, has said that 32 FTSE 100 companies have now taken proactive steps to remove longevity risk through bulk annuities and longevity swaps - which is comfortably more than one-third of those with defined benefit (DB) schemes. There has been £70 billion of completed transactions by FTSE 100 companies to date.
In most cases, companies have achieved their de-risking aims via a pensioner buy-in or a pensioner longevity swap, but a growing number of FTSE 100 companies such as Rolls-Royce and Rentokil Initial have instead opted for a buyout - removing all risk to secure benefits.
John Baines, partner in Aon’s Risk Settlement Group said:
“The risk settlement markets have grown significantly in recent years, but an important fact that is often overshadowed is that the UK’s largest companies are at the forefront of this surge. Reaching £70 billion of risk transfer is a significant landmark and is indicative of the increasing attention that pensions risks are getting at the most high-profile UK businesses. Insurance solutions send a very clear message to analysts and shareholders that management are proactively addressing the issue of pension risk.
“Indeed, following some of the recent buy-out transactions, the participating companies have seen an increase in share price. The pension risk settlement market has generally seen gradual but significant growth, but with this backdrop we believe the number of pension risk settlement transactions will accelerate as they climb the agenda of FTSE100 companies and become seen as a reliable way to remove risk and secure pensioner benefits.”
Martin Bird, senior partner in Aon’s Risk Settlement Group said:
“This year Aon has advised on settlement transactions relating to the pension arrangements of several FTSE 100 schemes, including National Grid, Rolls-Royce and HSBC. These transactions span the spectrum of available insurance solutions across buy-in, buy-out and longevity swap, demonstrating the breadth of requirements of large schemes.
“While there are clear differences which reflect the differing natures of the companies, we have also observed commonalities between these projects. Not least among these is the appeal to insurers of partnering with high profile organisations. This means that while attractive terms can be available, capturing them requires stakeholder collaboration, robust governance and a flexible approach.”
Notes to editors
FTSE 100 companies, as at 30 September 2019, sponsoring pension schemes that have carried out risk settlement transactions (names in bold indicate transactions led by Aon):
British American Tobacco
InterContinental Hotels Group
International Airlines Group
London Stock Exchange Group
RSA Insurance Group
Smith & Nephew
Notes to Editors
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.
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