The UK's bulk annuity market: Our end of year survey

It’s the end of a busy year in the bulk annuity market, so we ran a survey to get a sense of insurers’ views on what’s happened – and what lies ahead in 2024. We had responses from the deal leads from across all UK based bulk annuity providers.

The results are remarkably consistent across respondents. Overall, the message is clear: the insurers are extremely busy and triaging has increased. The relationship with consultants is becoming increasingly important, but respondents feel not all consultants have adapted to the new market landscape where insurers have increased bargaining power.

The bulk annuity market is very busy, with some finding it unmanageable

All respondents described their experience of the bulk-annuity market as very busy or extraordinarily busy/unmanageable.

When asked about projections for 2024, those predicting it to be unmanageable increased from 17% to 25%.

Triaging has increased

Nearly half of all respondents said they had triaged (refused to quote on) 50% or more of deals in 2023. Given the volume of business the insurers are experiencing and their level of busyness, it’s unsurprising this has had an impact on the their willingness to quote on deals.

Bargaining position is in the buyers’ hands

Given how busy insurers are, and the high level of triaging, we asked insurers about the impact this was having on market dynamics. 62% of respondents say we’re in a buyers’ market, where the insurer has the stronger bargaining position. But, of those, only 6% were convinced consultants had successfully adapted to the new market landscape.

Adapting to the new landscape requires streamlined processes and better preparation

We asked insurers to share what consultants can do to help their schemes and adapt to the new landscape. The themes centred around streamlining processes and the better preparation of data. You can do this by:

• running processes with clear and firm timelines
• thinking about the issues in advance and discussing with insurers before finalising the RFQ
• not bringing deals with bad data to the market
• preparing data and benefits better, ensuring all stakeholders are engaged, being flexible on timings, and considering the single insurer partnership process
• moving to realistic price expectations in the changing asset sourcing environment;
• having simpler RFPs with less asks for R1, RCTs etc
• streamlining processes and legals, and making them flexible
• understanding the insurer's capabilities, deal requirements and their target market
• Relationships are important in the new market landscape
• We asked insurers how likely they were to prioritise transactions based on their relationship with key individuals on the other side.

Relationships are important in the new market landscape

We asked insurers how likely they were to prioritise transactions based on their relationship with key individuals on the other side.

The threshold for residual risk transactions is rising

Residual risks used to be available on GBP100 million+ schemes. Now, 75% of respondents said they would consider RR on deals of GBP300 million+.

New entrants expected in the market

63% of respondents say they’re expecting a meaningful new entrant to the bulk annuity market in 2024. Of those insurers, 53% expect one new entrant, and 47% predict there will be two.

Mega deals haven’t had much impact on the market – but that may change if the size of transactions continue to increase

When asked what the impact of transacting deals valued at GBP3 billion+ would be on the market, opinions varied from little to no impact to a reduction in capacity and competition.

Comments from respondents included:

Reduced capacity and competition

• Reduced capacity for other deals
• Possible use of all of an insurer’s capacity – leaving the rest of the market more difficult to access
• Less competition for medium to large deals as the capacity of other insurers is limited
• Less competition in other segments of the market as some insurers divert their focus and resource that has happened this year. Mega (GBP3 billion+) will shift market capacity

Minimal impact

• Limited impact as insurers serve different market segments
• A few GBP3 billion+ deals won’t have that much impact
• Expect there to still be significant appetite in the market for transactions of all sizes

Demand is high and the market needs to adapt

We asked insurers whether they had any final thoughts on the year ahead or messages they wanted to share with the market. Here are a few:

• The market has been busy but it seems to be working as intended.
• It's been another exciting and busy year with lots going on in terms of exciting transactions and developments in the market.
• There’s a huge demand and insurers are ramping up capacity to adapt.
• The market was dominated by mega deals that saw a greater number of participants than ever before.

2023 has been a busy and challenging year, and 2024 will ramp up further. By working collaboratively, we’ll find a way to ensure as many schemes as possible will be able to de-risk in the coming years. For further guidance on how to adapt to the new landscape, view the Best Practice Guide.

DLA Piper collaborated with the UK insurers operating in the bulk annuity market to produce this. It’s designed to help the whole market and ensure everyone has the information and tools to get the quotation and transaction they desire.