As much as £30bn (€35.1bn) could be transferred to insurance companies through de-risking activity this year, according to consultants.
Willis Towers Watson predicted the total volume of buy-ins, buyouts and longevity swaps in the UK would hit a record level in 2017 after regulation and global politics led to a subdued period of activity in 2016.
The consultancy giant said deals could hit a combined £30bn in the next 12 months.
Shelly Beard, director in Willis Towers Watson’s de-risking team, said 2016 had been a year for “taking stock”, following major disruptive events such as the UK’s European Union referendum and the US presidential election.
However, the second half of the year “saw a marked increase in the value available in the bulk annuity market”, Beard said.
“Consequently, providers are entering the New Year with strong pipelines and several deals expected to trade in January, and more of our clients are approaching the market than ever, so we expect 2017 to start from a very healthy position in terms of appetite and deal pipelines,” she added.
Meanwhile, LCP also predicted a record year for de-risking, although its headline figure was half that of Willis Towers Watson’s at £15bn worth of buy-ins and buyouts.
Clive Wellsteed, partner at LCP, said the record appetite was to be driven by favourable pricing and increased capacity at insurance companies.
In addition, smaller schemes are more able to de-risk.
“There is plenty of scope for the market to grow even further over the next 10 years,” Wellsteed added.
“We predict insurer capacity will increase to over £20bn in 2017 and so will continue to exceed pension plan demand.
“But, over the medium term, there remains the real risk that demand from maturing defined benefit pension plans will exceed capacity, putting upward pressure on pricing.”
Last year saw the one-millionth person’s pension insured through a buy-in or buyout, according to LCP.
UK companies have transferred £70bn of assets to insurers in the past 10 years, the consultant said, equal to roughly 5% of total defined benefit pension assets.
Amid the expectations of record demand, Willis Towers Watson’s Beard warned that schemes could face competition for insurance capacity from other insurers seeking to offload legacy individual annuity “back books”.
Last year, Aegon transferred £9bn worth of liabilities from its individual annuities business to Rothesay Life and Legal & General.
Beard said: “We would advise that schemes wishing to engage in de-risking activity take note of back-book activity, as this should affect the timing of their approach to the market. We expect this element of the market may distract some of the buy-in providers at various points in the year.
“On a more positive note, some insurers will offer more attractive pricing opportunities if they have been left disappointed after missing out on attractive back books.”