UK - Pensions buy-ins in the UK reached a record level of £3bn over the past year as risk transfer deal activity gathered pace - yet opportunities might decrease as new regulations come into effect, according to a recent report by KPMG.
According to the accountancy, favourable pricing conditions and increasing innovation in financing risk transfer deals have been the main contributors to the £3bn record.
However, KPMG warned that the arrival of Solvency II legislation, due for January 2014, could make buy-ins harder for insurance companies to price attractively.
David Fripp, pensions partner at KPMG in Birmingham, said: "The stars are currently aligned exceptionally favourably for pensions buy-in, but this situation may not last."
Nonetheless, price falls and fears over Solvency II have led UK pension funds to transfer their liabilities to the insurance market over the last 12 months, the report said.
Companies looking to de-risk through a buy-in are looking for trustees to act quickly, before the new rules come into effect, Fripp said.
He added: "Many businesses looking to de-risk their pensions liabilities are hurrying to take advantage of the favourable pricing currently available and the opportunities to fund buy-ins with existing business and non-cash assets to get deals done quickly before Solvency II impacts are felt."
In spite of Solvency II and its potential consequences on the buy-in market, deal volumes are expected to continue to increase over the next year, according to KPMG.
This trend is explained by the fact that companies are currently able to negotiate extremely favourable pricing to de-risk their pensions liabilities and agree considerable flexibility in contract terms with insurers.
As KPMG notes, many deals involve a risk transfer for particular tranches or subsets of the pension liability, rather than a one-off deal for the total liability, which can provide increased flexibility.
In addition, some UK schemes can partly finance the buy-in by transferring actual assets rather than cash, subject to agreed valuation terms, which can lead to a lower cash cost.