Rothesay Life, a UK pensions insurance provider, has expanded its bulk annuity book with the purchase of rival MetLife Assurance, a subsidiary of the US insurance group.

The deal, still subject to regulatory approval, will see the transfer of around £3bn (€3.7bn) in assets between the insurers, as MetLife Assurance exits the UK and Irish markets.

The UK bulk annuity market, which sees insurers purchase the annuity policies of members in defined benefit (DB) schemes in return for assets and premiums, has changed a great deal since inception in the middle of the last decade.

Insurers, such as MetLife, entered the market around 2007, picking up vast amounts of business during a booming 2008, as economic conditions favoured these policies.

However, as conditions turned in subsequent years, the de-risking market moved towards hedging, over the transfer of risk.

This period witnessed the withdrawal of several insurers, such as Aviva and Lucida, which either left the market or significantly reduced focus on bulk annuity business.

Rumours over MetLife Assurance’s withdrawal from the UK market surfaced in the early part of 2013, after it was discovered Citigroup had been appointed to potentially run its auction.

MetLife wrote around £55m of business in 2013, accounting for around 1% of the market, according to consultancy LCP.

This level, in itself, was a significant reduction on the 5% market share, while only £256m of business was seen in 2012, despite 2013 being a £5.5bn record year for transactions.

The purchase by Rothesay Life boosts its position in the market, as it steps up competition with market leader Pension Insurance Corporation (PIC).

Rothesay Life wrote £1.3bn of new bulk annuity business in the first three quarters of 2013, taking up one-quarter of the market.

However, in the same period, PIC wrote £2.7bn, as it absorbed just short of half of all bulk annuity business seen from UK pensions schemes.

The move for MetLife follows Rothesay Life’s recent influx of new capital, after parent company Goldman Sachs announced its intention to sell part of the wholly owned subsidiary.

A collective of investors, including the Singapore sovereign wealth fund and asset manager Blackstone, purchased 64% of the insurer.

Addy Loudiadis, chief executive at Rothesay Life, said the acquisition of MetLife Assurance would turn Rothesay into the largest dedicated provider of bulk annuity assets, in terms of assets under management.

With the transfer of MetLife’s 20,000 policies from the UK and Ireland, and £3bn in assets, Rothesay now has more than £10bn in AUM.