Half of the £2 trillion ($2.7 trillion) in U.K, private-sector pension liabilities will be insured by 2031, according to an annual risk transfer report released Thursday by pension consultant Hymans Robertson.
One-third of those defined benefit liabilities have already been insured, with half of that activity coming in the last three years, said the Risk Transfer Report 2022.
James Mullins, partner and head of risk transfer solutions for Hymans Robertson, said in a statement with the report that between improved funding levels, attractive insurer pricing and new alternative risk transfer options, "we expect that within 10 years those figures will grow materially."
The report said that 15 years ago, ongoing DB pension funds started using bulk annuities and then longevity swaps. Since then, "this risk transfer market has taken off," the report said. While the firm saw "jumbo transactions" by a few of the largest pension funds, there has also been a steady increase in smaller transactions, as more pension plans getter better funded and in position to transfer risk, it said.
Mr. Mullins predicted "a material shift" for pension fund participants over the next 10 years, as management shifts from trustees to insurance companies, underscoring the need for careful communication and oversight by U.K. regulators.
