LONDON (5 April 2017) – Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE:AON), has released Risk Settlement Market 2017. This year’s report highlights progress in the risk settlement market over the last year and analyses the way it is developing during 2017.
Key highlights and themes include:
- The most significant year so far for the UK bulk annuity market with £19bn of business
- The first longevity swap conversion – advised by Aon
- Use of Aon’s Bulk Annuity Compass to complete repeat transactions for CAA, Pilkington, Aon, Smiths Group and Alcatel Lucent, capturing attractive bulk annuity pricing following the outcome of the EU referendum
- Opening up of the longevity hedging market to schemes with less than £500m of pensioner liabilities
- The benefit of data and benefit preparation in advance of approaching the market.
Martin Bird, senior partner and head of Risk Settlement at Aon Hewitt, said:
“2016 was a year of surprises in many areas and the pension scheme risk settlement market was no exception – in part reflecting the changes taking place at a political and economic level.
“It was the bumper year we expected in the bulk annuity market, proving that the regulatory changes brought in by Solvency II were not going to curb enthusiasm for insurance-based solutions. But it was a different story in the longevity market where new mortality data and low gilt yields presented pricing challenges for schemes looking to transfer risk.
Martin Bird continued:
“We have already seen signs of more subtle changes across the market in 2017. Insurers have boosted their teams in anticipation of a busy year and it is quite possible that deal volumes in bulk annuities could exceed £20bn. New mortality data is also feeding through to pricing which may mean a significant 12 months for the longevity market too. As ever, it’s a case of watch this space.
“However, one aspect that remains unchanged is the need for schemes to be prepared to move when the moment – and therefore the pricing – is right. While that still means ensuring you have clean data, we are now also seeing schemes attacking the issue of derisking from another angle, chiefly by liability management exercises or introducing flexible retirement options. These approaches are rapidly growing in popularity and can make a key contribution to schemes reaching their end-goal.”
Notes to Editors
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