Comprehensive analysis of the buy-in market
Buy-in monitoring service – August 2020
10 Aug 2020
In this edition of our buy-in monitoring service, we share our usual pricing analysis as well as providing an insight into the latest buy-in activity.
This quarter's headlines include:
Window of opportunity closes, but general pricing levels remain good value
As credit spreads narrow back down, the pockets of particularly attractive buy-in pricing seen over March and April have fallen away. Although this window of opportunity has closed, pricing for pensioner buy-ins remains good value and as attractive as it has been since the middle of 2018.
With different economies implementing their paths out of lockdown, companies will be continually reforecasting their business models and assessing their needs – further volatility in the credit markets is a distinct possibility.
Pension schemes that have clear pricing targets, have their data and benefits loaded onto insurers’ pricing systems and have the approvals in place to transact, will be in prime position to benefit from future pricing opportunities.
Entering a period of varied and fluctuating insurer appetite
As we approach the fourth quarter of 2020, the buy-in pricing pension schemes will see is likely to be significantly influenced by supply-side factors at the insurers. 2020 will undoubtedly see lower transaction volumes than 2019, but with volumes expected to be around 2018 levels (which was itself a record year), insurers will still be expecting a significant flow of business in the market.
Going into Q4, some insurers will be very comfortable with the business they have written over the year and their projected future pipeline, whilst some will be keen to write more before the year end. With some large transactions in the market at the moment, the appetites of different insurers has the potential to change quickly and to vary significantly between insurers. Pension schemes will have to look carefully at the quotes they are receiving and assess whether their pricing is being negatively impacted by other activity in the market, or whether they have an opportunity to transact with an insurer who is particularly keen. Knowledge of what the market looks like through the eyes of different insurers is going to help trustees make the best decisions in a period of fluctuating insurer appetite.
See the bigger picture
Download our fourth annual risk transfer report, where we track the recent key changes in the market, with a particular focus on bulk annuities, and look at what these could mean for your defined benefit (DB) pensions scheme.