Aon has set out six key priorities for the UK bulk annuity market, highlighting the need for continued improvements in member experience, innovation around illiquid assets, transparency in funded reinsurance, enhanced ESG reporting, strategic future planning, and demonstrating economic contribution.
The letter, dated January 2025, emphasises the market’s rapid growth, with Aon having led over £72bn in bulk annuity deals in the past six years.
According to Aon, end-game planning for pension schemes involves carefully evaluating insurance options, with a focus on delivering security and great service for scheme members “for decades to come”.
In order to support schemes that have either already executed bulk annuity transactions or are contemplating insurance transactions in the future, Aon set out the six priorities for insurers.
Priorities
Firstly, Aon highlighted that member experience remains a top focus for schemes and the industry is pushing for more flexible, seamless transitions from buy-in to buyout, ensuring members receive comprehensive and adaptable services.
Innovation around illiquid assets is another crucial area, according to Aon. It pointed out that insurers and advisers are already developing solutions to help schemes with complex asset portfolios transition more effectively to insurance.
However, it said that more innovation is needed in this area, particularly for schemes that have reached their endgame sooner than anticipated and are unable to transition to insurance in a cost-effective way due to costs and haircuts of unwinding complex liquid asset portfolios.
Aon also called for increased transparency regarding the use of funded reinsurance and progress on ESG matters.
With the Prudential Regulation Authority (PRA) continued focus on funded reinsurance, Aon has called for increased public disclosure in this area.
It said that an improved market understanding of the benefits and risks associated with this form of reinsurance is beneficial for continued market confidence in the insurance regime.
Aon pointed out that its clients are also “keen to understand” insurer policies and philosophies on ESG matters, such as climate change, social impact reporting and their approach to diversity, equity and inclusion.
The firm anticipates that while run-on will be initially chosen as a significant proportion of schemes, buyout will remain the ultimate destination. Therefore, it has called on insurers to engage “more deeply” in discussions about insurance transitions and economic contributions.
Ultimately, it said the focus is on a productive agenda and insurers should set out with “greater clarity” actions and investments that are being undertaken to support this.
It said: “We think greater engagement on the topic could help improve confidence in the insurance sector, as pension scheme decision-makers think about the future.”
Read the digital edition of IPE’s latest magazine
No comments yet