Pensions buyout deals totalled £8.1 billion in 2010

Pensions buyout deals totalled £8.1 billion in 2010. 

According to JLT Pension Capital Strategies’ (PCS) Buyout Market Watch, late activity in the fourth quarter of 2010 saw £1.6 billion of deals being completed, contributing to an overall increase of 8% from 2009.

The £8.1 billion includes a £3 billion longevity swap between BMW and Abbey Life.

The report also found buyout prices were generally stable in 2010, and during the last quarter there was evidence that some insurers have improved their pricing basis, carrying optimism of high business levels being written in early 2011.

Business during 2010 was shared between a number of providers, which is evidence of a convergence in prices between the leading insurers and a healthy market.

According to PCS, significant changes to prices in the short term appear unlikely, unless external influences dictate this.

Insurers have indicated that the impact of Solvency II (the strengthening of insurers’ reserving requirements) has already been reflected in their prices.

Tiziana Perrella, head of buyout Services at PCS, said: “A frantic fourth quarter ensured 2010 was a big year for the buyout market.

“There remains a clear desire from sponsors for schemes to reduce risk, with buyouts being the ultimate aim.

“Insurers are continuing to adapt to the requirements of schemes, developing intermediate solutions to enable full buyouts to become attainable over time.

“We expect the market to continue to innovate, providing solutions for all but a few very poorly funded schemes.

“Though very few schemes will be in a position to complete a full buyout, many could realistically buyout pensioner liabilities or even a tranche of liabilities.

“The quotation pipelines reported by insurers in the final quarter of 2010 were very healthy, leading to a bullish view for the market in the early part of 2011.

“Unless changes in the economic situation dictate otherwise, we expect total buyout activity to exceed £10 billion during 2011.”

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