Smaller bulk annuity deals surge in first half 2020, mega deals fall: Aon

The number of smaller bulk annuity transactions have increased in the first half of 2020 due to favourable market dynamics, such as attractive insurer pricing and increased capacity during the period, according to re/insurance broker Aon.

The first half saw a near 20 percent increase in the number of smaller (sub-£100 million) transactions compared to the same period last year.

However, fewer jumbo transactions took place in the market compared to last year, which has meant insurers have had more capital and manpower to deploy across a wider spectrum of transactions

Aon expects this trend to accelerate through the remainder of 2020.

Analysts believe that an increase in the use of streamlined auction processes for smaller transactions particularly helped during recent volatile market conditions.

Also, investment in technology and operational capacity at the smaller end of the market has helped increase supply for smaller schemes looking to de-risk.

“A number of factors, including the impact of COVID-19, market volatility and an increased insurer capacity, have led to many more smaller transactions taking place," said Stephen Purves, partner at Aon. "This is particularly so when compared to recent years in which larger transactions have dominated – and maybe it has changed the perception of the sort of schemes that should and can come to market.”

He added: "There has been a misconception that smaller schemes struggle to access competitive pricing from insurers, so it is really pleasing to see them taking advantage of these market opportunities and transacting in the first half of 2020. Attractive insurer pricing and increased insurer capacity for well-prepared schemes has completed the picture."

“Streamlined transaction processes such as Aon’s Pathway, coupled with agile governance from scheme trustees, has meant that smaller schemes have been ideally placed to take advantage of the market opportunities that have arisen so far in 2020," said Purves.

“Looking ahead, insurers are expecting this activity at the smaller end of the market to continue through to the end of the year. It’s clear that they are placing increased importance on good scheme preparation to maximise their interest and to ensure schemes are ready to trade when opportunities arise."