The second half of 2017 is shaping up to be a “bumper” period for the bulk annuity market, Aon Hewitt believes.
Pricing at a 10-year high and plentiful capacity will drive an increase in activity, the firm says.
Aon Hewitt senior partner and head of risk settlement Martin Bird said the market always has a range of factors which affect the way it operates and particularly the timing of deals.
“But as we hit the halfway mark in 2017 it’s clear that the stars have aligned to make pricing levels look very attractive and we expect a corresponding rise in activity,” he added.
Key factors that are creating fertile ground for bulk deals include improving funding levels thanks to a buoyant stock market and a weak pound, while the Solvency II regime is bedding down allowing insurers to set attractive prices.
The easing of life expectancy projections is another factor, especially as they are being reflected in reinsurance quotes, which supports attractive annuity pricing.
Aon Hewitt risk settlement partner John Baines said this is good news for the risk settlement market, but only if pension schemes are ready to capitalise on opportunities this situation brings.
“To do this, schemes need to do the groundwork properly, making sure that scheme data is in good order and giving consideration to how a bulk annuity will fit within the scheme’s de-risking plans,” he added.
“They must also have clear decision making and governance processes. They will then need to be patient and wait for the right price to materialise – but armed with the ability to move quickly when the time is right. And increasingly, that time is emerging.”
