Appetite for multi-insurer buy-in approach remains 'strong'

Written by Sophie Smith

07/12/2023

Appetite within the pensions industry for a multi-insurer auction process when brokering a buy-in remains “strong”, according to research from LCP, with almost three quarters of pension scheme trustees and corporate sponsors who expressed a preference indicating that this is their preferred approach.

Of those preferring a sole insurer approach, just over a third (35%) indicated this was because they wanted to do a follow-on transaction with an incumbent insurer, whilst around 20% said it was due to their scheme's particularly complex requirements, and a little under 45% cited other reasons.

Despite the majority preference for multi-insurer processes, LCP argued that there are situations where a sole insurer process is the optimal approach.

LCP’s research previously showed that the bulk annuity market had become much more challenging in 2023 on the back of unprecedented funding improvements, leading to a drop-off in the number of insurers participating in each buy-in process, with more schemes running sole insurer processes as a result.

However, LCP argued that well-presented schemes can still run multi-insurer auction processes if they wish, and that pricing remains highly competitive even for the smallest schemes.

LCP pointed to its own experience with small schemes as evidence of this, having helped 14 schemes under £100m run successful insurer selection processes in H2 2023, with 11 of these attracting multiple insurers; the smallest of which was £10m and received three quotations.

LCP pension de-risking principal, Ruth Ward, commented: “The message we have for pension schemes is that they shouldn’t feel they are forced to go down a sole insurer route.

“The market may be much busier but, in our experience, a well-presented scheme with a well-run process can access a multi-insurer process if they wish, whatever their size.

“Schemes’ individual circumstances will dictate what is the right approach for them, but in many cases running a multi-insurer process will result in the best outcome.

“The most important element of an effective process is having well-engaged insurers keen to direct their pricing firepower, and a share of their finite pipeline of higher-yielding assets, at your transaction.

“With soaring numbers of schemes seeking pricing, it’s more important than ever to carefully plan your approach so as to position yourself effectively with insurers and secure strong engagement whatever your preferred route to market.”

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