Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

Facts & figures: DB derisking rises as life expectancies fall

Buying insurance policies for DB schemes is going strong this year, making derisking more affordable

This year has got off to a strong start with buy-ins and buy-outs of UK pension plans almost doubling in the first half of the year (H1) to £5.1 billion.

Buy-ins and buy-outs are when defined benefit pension trustees buy an insurance policy to cover a group of their members, thus derisking the scheme.

The strong momentum since the EU referendum has also continued, with around £12.5 billion of policies written in the past 12 months.

Pricing remains keen, driven by a high level of competition, particularly for mid-sized transactions between £100 million and £1 billion.

Looking ahead, 2017 is well on track to exceed £10 billion of buy-ins and buy-outs in the second half of the year (H2) for the fourth year running, and has the potential to exceed the record £13.2 billion set in 2014.

The start of 2017 has also seen the biggest fall in life expectancies in a generation. The latest mortality projections by the Continuous Mortality Investigation knocked 2% to 3% off pension liabilities. This reduction improves pension plan funding, making derisking more affordable.

Insurers and reinsurers remain cautious about translating recent heavy mortality experience into long-term trends. But there is no doubt it has helped drive recent competitive pricing, along with the attractive asset opportunities that insurers have been able to source.

Charlie Finch is a partner at Lane Clark & Peacock

This year has got off to a strong start with buy-ins and buy-outs of UK pension plans almost doubling in the first half of the year (H1) to £5.1 billion.

Buy-ins and buy-outs are when defined benefit pension trustees buy an insurance policy to cover a group of their members, thus derisking the scheme.

The strong momentum since the EU referendum has also continued, with around £12.5 billion of policies written in the past 12 months.

Pricing remains keen, driven by a high level of competition, particularly for mid-sized transactions between £100 million and £1 billion.

Looking ahead, 2017 is well on track to exceed £10 billion of buy-ins and buy-outs in the second half of the year (H2) for the fourth year running, and has the potential to exceed the record £13.2 billion set in 2014.

The start of 2017 has also seen the biggest fall in life expectancies in a generation. The latest mortality projections by the Continuous Mortality Investigation knocked 2% to 3% off pension liabilities. This reduction improves pension plan funding, making derisking more affordable.

Insurers and reinsurers remain cautious about translating recent heavy mortality experience into long-term trends. But there is no doubt it has helped drive recent competitive pricing, along with the attractive asset opportunities that insurers have been able to source.

Charlie Finch is a partner at Lane Clark & Peacock

Lane Clark & Peacock pensions derisking update August 2017

Lane Clark & Peacock pensions derisking update August 2017

Lane Clark & Peacock pensions derisking update August 2017

Lane Clark & Peacock pensions derisking update August 2017

Lane Clark & Peacock pensions derisking update August 2017

Comment & analysis

Twitter