NatWest’s record-breaking buy-ins illustrate a healthy market for pension fund insurance, writes Pensions Expert editor Nick Reeve.
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Journalists love a big number, so news of NatWest’s buy-in transactions, worth approximately £11bn, made headlines when it was first reported by Sky News’ Mark Kleinman last week.
NatWest has given very few details and the insurer, Rothesay, has not even publicly acknowledged the transactions (although Pensions Expert has been assured by the bank’s press office that the details reported are correct).
It appears there have been two buy-ins, both completed this year, and given the overall size it is likely one or both may be the biggest ever individual buy-ins ever completed.
Rothesay recently hit one million members and said in its recent half-year results that it had several large transactions in the pipeline.
At the other end of the scale, on Friday K3 Advisory announced a £2m full-scheme buy-in for an unnamed mechanical and electrical industry company scheme. Legal & General was the insurer, demonstrating that it is among the growing number of insurance companies willing to transact with the very smallest schemes in the country.
Other deals announced this week – involving Pension Insurance Corporation, Standard Life and Canada Life – also demonstrate a healthy market for sub-£250m schemes, thanks in part to insurers and consultants setting up streamlined processes for these clients.
The bulk annuity market is well on track to hit £40bn of new business written this year, as has been widely forecast by consultancy groups.
As great as this is for member security (and headline writers), questions remain about the ongoing capacity of the insurance and reinsurance markets to take on these risks, and the ability of their administration and operations teams to handle the growing number of members they now look after.
When does a pension insurer become ‘systemically important’ or ‘too big to fail’?
Nick Reeve is editor of Pensions Expert.
