Insurers increasingly offering streamlined services to meet smaller bulk annuity deal demand

Written by Jack Gray

09/07/2024

Pension insurance companies are increasingly offering streamlined propositions to meet the demand of smaller defined benefit (DB) pension schemes looking to complete bulk annuity transactions, Hymans Robertson has noted.

The consultancy stated that with more smaller pension schemes being able to afford to insure their benefits amid improved funding levels, insurers are looking at ways to increase their capacity.

This has resulted in many launching streamlined services for smaller DB schemes to meet their needs and for insurers to be able to increase their ability to provide quotations, transact, and onboard more smaller schemes.

Insurers were found to have increasingly turned to technology and have looked to remove friction from existing processes to reduce the sunk costs of quoting on and then transacting with smaller schemes.

Four insurers in the bulk annuity market have developed dedicated streamlined propositions for smaller schemes, and Hymans Robertson said it expected more insurers to follow this trend.

The consultancy noted that trustees of smaller schemes have generally welcomed streamlined insurer services, but argued that they should also be mindful of the drawbacks so they can be planned for and managed proactively.

It pointed to greater insurer engagement, and efficiency and speed, as some of the benefits of streamlined propositions.

However, it urged smaller scheme trustees to consider the process differences between insurers, noting that streamlined processes can mean more up-front work for trustees, restrictions on the types of benefits they are willing to insure, and less flexibility on contractual terms.

“The use of streamlined propositions by many insurers is now the norm for smaller schemes seeking quotations,” commented Hymans Robertson head of core transactions, Iain Church.

“This is a welcome development for both small DB schemes and insurers, as streamlined services which make the process of insuring more efficient, and quicker, can only be a welcome change.

“At our recent webinar aimed at pension schemes under £200m, almost half of those attending said they see generating sufficient insurer engagement as the biggest challenge to insuring their schemes.

“These streamlined propositions make it easier for insurers to provide quotation and therefore remedy the engagement challenge that many trustees are facing.

“Whilst streamlining the process is a positive step, trustees should remain mindful about the lack of flexibility that may arise from such offerings and must be aware of any restrictions that these offerings bring.

“Working with a well-established risk transfer adviser is therefore crucial to ensure transactions best meet scheme’s objectives. We look forward to seeing the bulk annuity market develop and grow as more insurers look to follow this trend.”

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