General Insurance Article - Risk settlement market is buzzing but faces fresh challenges

 This year’s research is based on quantitative survey results from 61 UK defined benefit schemes, ranging in size from less than £20 million to over £1 billion in assets under management, and with an average solvency funding of approximately 80 percent.

 John Baines, partner in the Risk Settlement Group at Aon, said: “We are releasing this year's survey at a pivotal moment in the risk settlement market, with rises in yields meaning that buyout liabilities have typically fallen by over 20 percent so far in 2022. This reduction in scheme sizes means that insurers will need to insure significantly more schemes – when measured on a like-for-like basis – in order to match their level of business in 2021. We know that most insurers in the risk settlement market are looking to grow, so there should be considerably more capacity in the market compared to 2021.

 “The financial conditions that impact insurer pricing are also incredibly attractive, driven in particular by widening credit spreads. Combined with the additional capacity, this means bulk annuities are now looking particularly appealing for many schemes.”

 John Baines continued: “But the market certainly has some challenges to deal with as it navigates new forms of volatility and the additional demand from pension schemes. We see the biggest challenge as being the human resource at insurers required to price, implement and operate insurance policies. This may have ramifications for how easily deals can be processed across the remainder of the year, with the best-prepared schemes continuing to benefit most.”

 Aon Risk Settlement Survey 2022