The UK pension risk transfer (PRT) market has delivered – yet again – a high-activity start to the year, with two new insurers entering the market, and deals aplenty being completed. Greg Winterton spoke to Shelly Beard, Managing Director at WTW, to get her views on the state of play in the market as we approach the halfway point of 2025.
GW: Shelly, to begin, 2024 delivered many transactions in the small and large ends of the market – almost a barbell type situation. What about the middle market? Has this part of the space seen any pick-up?
SB: Whilst 2024 may not have been quite as busy in the “mid-market”, this continues to be a busy sector and one that is well served by the insurance market. It’s fair to say it gets less “noise” than the other ends of the market that you’ve highlighted, with insurers spending a lot of 2024 shouting about how far they’ve come in terms of their offerings for small schemes, which had become an underserved part of the market in recent years.
In fact, I’d say right now, deals between £0.5bn and £1.5bn are probably the most hotly competed part of the market, achieving a large number of quotes (e.g. we had nine insurers quoting on a recent deal) and some highly attractive pricing. This reflects the fact that as well as the established insurers quoting for this size of transaction, many of the insurers who have traditionally focused on the smaller end of the market have now increased their ambitions for larger deals, which is shaking things up.
GW: There have been three new insurers enter the UK market in the past year; two of them in 2025. What’s your view on just how many more the market could realistically feature?
SB: You’re right, we now have more insurers actively quoting on deals than ever before. This is good news in the short term for pension schemes, as those insurers need to offer compelling pricing in order to establish themselves in the market. Further, more choice for trustees can only be a good thing, with the new entrants seeking to differentiate themselves across aspects such as speed of transition to buyout and member experience.
From speaking to the new insurers, most have relatively modest ambitions in terms of the amount of business that they wish to write over the next few years, so alongside expectations that the total volumes of business across the market will continue at similar (or higher) levels, I think there’s space for all of the insurers.
In terms of whether further new insurers could enter, I think that whilst there is capacity in the market, such a new entrant would need to think about their USPs and offer something new to be able to stand out from the crowd.
GW: We spoke at the end of last year for an article about longevity swaps. What have you seen in this part of the market at the start of this year? Has activity ticked up at all?
SB: It’s actually been an incredibly busy 12 months in the longevity swap market, with six deals covering more than £16bn of liabilities transacting. When we spoke late last year, I had to be a bit coy about deals we’d led but which hadn’t been publicly announced: Sorry about that! A key feature of last year was increased focus from the market in smaller deal sizes, at attractive pricing, demonstrating that longevity swaps aren’t only for mega schemes.
This theme of a busy market has continued into 2025, with a good level of activity expected across the rest of the year and the reinsurers continuing to show good appetite for new deals.
As and when more clarity is provided by the government on potential surplus sharing arrangements, to the extent this may lead to more schemes actively considering “running on” for a period, we expect there to be an extra pick up in longevity swap activity, as longevity risk is generally regarded as unrewarded, and so a good risk to remove in the context of run-on.
GW: There was plenty of talk at the beginning of this year about the buy-in to buy-out conversion. What’s been happening here so far in 2025?
SB: This is very much still a hot topic in the industry. As it stands, whilst 200-300 buy-ins are written each year, the number of buy-ins that are then converted to buyout is substantially lower – so there is a significant backlog building up. This is something we’re actively keeping an eye on – for example we recently undertook a detailed survey to ensure we understand the approach that insurers take to supporting their clients during this crucial period.
That’s not to say that insurers are necessarily at fault here, however. The burden on pension scheme administrators is ever growing, which can mean that they may struggle to keep up with the additional actions needed between buy-in and buyout. For example, to undertake thorough data cleansing and equalising GMP. In my experience it’s really important that all parties are realistic about what is achievable, bearing in mind the work that needs to be completed and any resource constraints.
GW: Lastly, Shelly, what’s the outlook for alternative risk transfer offerings through the balance of the year? It seems like this part of the market is like a car with the accelerator pedal down but the handbrake on – it’s forever ready to go but doesn’t seem to actually take off.
SB: I like the analogy. In practice I think this may be the year that the handbrake comes off, albeit I think the foot on the accelerator is a cautious one! Thinking for example of the superfund market, the Wates transaction at the end of last year, which was the first deal for Clara where the pension scheme had the support of an ongoing sponsor, was a big turning point and we have seen a significant increase in interest from clients as a result of this deal. And the Pensions Regulator and DWP continue to show their support for superfunds and consolidation in general. It will certainly be interesting to see how many more deals come to fruition.
Shelly Beard is Managing Director at WTW
