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Aley: We don't see uncertainty denting demand

Pension risk transfer volumes this year will look similar to those in 2020 as market volatility creates opportunities for schemes able to act fast, according to Willis Towers Watson.

In its annual de-risking report, published today (19 January), the consultancy predicted that buy-in and buyout volumes would top 30bn in 2021, while longevity swap deals would approach 25bn.

Around 24.2bn of bulk annuity deals for 2020 have so far been announced, although Willis Towers Watson said it was aware of at least 26bn announced or that it had advised on, while another 4bn are set to be confirmed within the coming weeks.

Willis Towers Watson said market volatility seen in 2020, which led to "incredibly attractive" insurer pricing as credit spreads widened, could be repeated in 2021 amid continuing pressures from the pandemic and Brexit.

On a similar note, lower than expected rates of mortality improvement in the years to 2020, as well as a growth in the number of reinsures in the market, has contributed to reduced costs of pensioner longevity swap pricing, a trend the consultancy expected to continue.

Managing director in transactions Ian Aley commented: "The pensions de-risking market has proved itself to be incredibly resilient and, while uncertainty will remain in 2021, we don't see this denting the desire and ability for pension schemes to complete risk management transactions.

"It remains to be seen what impact Covid-19 will have on longer-term expectations for mortality rates. For many schemes, the market pricing of longevity will currently look very attractive relative to their funding reserves.

"We therefore expect schemes will continue to look to lock into assumptions which are affordable against their current funding target to reduce future uncertainty as part of their wider hedging programmes."

Willis Towers Watson also predicted an "acceleration" in the superfund or defined benefit consolidation market following the introduction of an interim regulatory regime last year, particularly as Covid-19 financial support unwinds and corporates enter distressed scenarios.

Originally posted here:
Exclusive: Market volatility to spur 30bn of buy-ins and buyouts in 2021 - http://www.professionalpensions.com

This entry was posted on January 19, 2021 at 12:51 pm and is filed under Longevity. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed. |