Pensions - Articles - Comments on the British Airways bulk annuity buy in

Moody's and JLT comment on the completion of Legal & General’s £4.4bn buy-in with the British Airways PLC's pension scheme, Airways Pension Scheme

 Benjamin Serra, a Vice President and Senior Credit Officer at Moody’s Investors Service: “A number of UK life insurers remain focused on growing risk products such as bulk annuities, and the £4.4 billion deal announced today by Legal & General illustrates that the demand for these products is high. However, bulk annuity players rely on reinsurers to off-load longevity risk, and the ability to source higher-yielding illiquid assets is critical to their profitability”.

 “Legal & General, thanks to its expertise in funding real estate and infrastructure developments, is one of the few insurers able to compete on very large bulk annuity deals and make them profitable”.

 Moody's Investors Service in a report published today has confirmed the stable outlook for the UK life insurance sector for the next 12 to 18 months as continued performance resiliency underpins operating profit growth for the sector.

 Ruth Ward, Senior Consultant at JLT Employee Benefits, said: “Today’s announcement will make 2018 a record year for the bulk annuity market with over £26bn of business written year to date – and that’s before we hit Q4. It’s encouraging to see many schemes taking advantage of better market conditions and improved funding levels and taking steps to future proof their schemes. We’re seeing trustee and sponsor appetite to settle costly legacy pension liabilities, whether via transfer payments, traditional insurance or new consolidation vehicles, continue to rise. Volatility will remain a permanent feature of bulk annuity prices and those schemes in the market and actively monitoring pricing will be at an advantage, as we are seeing for the schemes we advise.”

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