Brookfield’s entry into UK bulk annuity market marks next wave of new entrants

Canadian private capital giant Brookfield has reportedly applied to establish an insurance company in the UK as it looks to enter the booming pension insurance market.

According to reports, Brookfield’s insurance arm, Brookfield Reinsurance, has filed paperwork with the Bank of England’s Prudential Regulation Authority (PRA) to set up a new insurer. The application process is understood to typically take six months, but could take longer if the regulator raises questions over Brookfield’s potential investment strategy.

The move was first signalled by Sachin Shah, chief executive officer of Brookfield Reinsurance, back in May, saying that the business plan was to enter the UK market and start “bidding on transactions” by the end of the year.

Brookfield’s intent to enter the UK bulk annuity market follows a recent announcement by  Royal London and Utmost, bringing the market to 11 participants and, according to Charlie Finch, partner at LCP,  demonstrates just how vibrant the UK bulk annuity market is.

Finch said: “Brookfield already participates in both the US and Canadian bulk annuity markets, and has the potential to be a significant provider in the UK market.

“Their entry will add further capacity and competition as record numbers of defined benefit schemes enter into buy-ins and buyouts, with volumes of up to £600bn predicted over the next 10 years,” he continued.

According to Adam Davis, managing director of K3 Advisory, this is the “second great wave of new entrants to this market”.

“The first wave in 2007-08 was driven by scheme closures and expected demand. This new wave is entirely driven by the large increase in demands because of improved scheme funding,” he noted.

“Brookfield [is] the latest of three new entrants and we have already seen keen pricing and an increased appetite for smaller schemes, which is fantastic news for the market,” Davis said, adding that he was aware of “at least” three other new entrants at varying stages of readiness to enter the market and expects to see more “as we move into 2025”.

Richard Gibson, partner at Barnett Waddingham, said that the firm is currently working with “multiple insurers” at an advanced stage of entering the market, and he welcomed Brookfield’s approach.

“Brookfield already has a developed presence in the buyout market in North America and should be able to provide welcome additional capacity.”

He added that greater choice is a “boon” for pension schemes but trustees will want to “carefully pick the right insurer to work with if they want members and employers to get the best deal in the buyout market”.

Nikesh Patel, head of client solutions UK at Van Lanschot Kempen, also expects additional new entrants over the course of this year and next.

And while he said this will increase the capacity to undertake new transactions, as well as increase competition for deals, the underlying capacity constraints remain, as new insurers are still competing for the same talent who can appropriately price and transact in this market.

Patel added that the length of time it has taken for Brookfield to enter the market also highlights an issue beyond resource. He said it is that gaining the Financial Conduct Authority’s approval is both expensive and time-consuming, and warned that it will create an additional barrier to entry, limiting the number of new players.

Ian Aley, head of transactions at WTW, agreed that barriers to entry are high – with the PRA being focused on ensuring long-term security for policyholders. However, he said that many consider the “prize” is potentially worth it, with a material pipeline of new premiums to be written over the next decade.

He continued: “As we’ve been speaking to potential new insurers, it’s interesting to hear their differentiators and the target markets they have, which should open up more opportunities for UK pension schemes.”

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