The insurance market is expected to see a return to ‘normal’ levels in 2020 with a capacity to accommodate around £30bn worth of deals, industry experts have said.

Following a record breaking year of an anticipated £40bn worth of deals, Lane Clark Peacock (LCP) has predicted that almost £800bn of liabilities could be expected to line-up for transfer to the insurance market over the next 15 years.

Furthermore, Willis Towers Watson said that it expected bulk annuity deals in excess of £30bn in 2020.

The £40bn worth of deals completed in 2019 was made up of around 100 deals, a third less than the 162 deals which took place in 2018.

Three quarters of this total volume in 2019 was accounted for by just 11 transactions, with 2020 expecting to see around 10 transactions covering a total of £15bn, LCP has predicted.

LCP has emphasised that this would leave further capacity for smaller bulk annuity transactions, covering liabilities in the range of £250m and £1bn.

This sentiment was echoed by Willis Towers Watson, which stated: “The increase in multi-billion-pound deals dominating the market has been to the detriment of smaller pension schemes, which struggled to get traction."

LCP partner, Myles Pink, commented: “We expect 2020 to see a greater mix of transactions, with fewer high-profile deals and an opportunity for smaller transactions to complete.

“Demand will remain high as more pension schemes approach maturity and are successful in reaching their long-term funding target.”

Willis Towers Watson head of transaction team, Ian Aley, added: “This year has seen a remarkable number of mega deals, so although we expect a reduction in the number of large deals through 2020, there is certainly lots of ‘pent up’ demand in both the longevity swap and bulk annuity markets.

“Larger schemes should consider partnering with insurers to find optimal assets to match their liabilities. There is great opportunity for smaller schemes to find more traction in the market if they can focus on streamlining processes, with good preparation, governance and pre-agreed legal terms.”

Willis Towers Watson have also predicted that 2020 could see a “record year of hedging”, as schemes may look to lock in current life expectancy assumptions as they are the lowest in over a decade.

LCP agreed, predicting continued momentum in the longevity swap market, forecasting a slightly lower estimate however of between £10bn and £15bn in 2020.

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