New entrants to the bulk annuity market are expected to give defined benefit (DB) pension scheme trustees more power of choice, although it could also lead to some questions, Hymans Robertson has said.

The firm suggested that a number of new insurers are expected to enter the bulk annuity market, attracted by the record-breaking numbers and volumes of transactions.

Indeed, the group pointed out that recent strong demand has already encouraged some new entrants to the market, with M&G re-entering the bulk annuity market earlier this year, making it the first new entrant since 2017.

Commenting on the changing market, Hymans Robertson partner and head of alternative risk transfer, Iain Pearce, said: “Trustees will have even more insurers to consider when assessing newer entrants alongside established providers.

“Trustees are already typically assessing insurers on a much wider range of capabilities than when many of the now established insurers joined the market.

"These include financial strength, environmental, social and governance (ESG) factors, administration capacity and quality, buyout capabilities, and brand awareness."

Given this, Pearce argued that it is no longer enough for a new entrant to simply be willing to write long-term pensioner buy-ins at lower margins to get a foothold in the market.

“Insurers need to show their capabilities in a range of areas, and work hard to give as much assurance as possible to back up their business plans and promises," he continued.

"Trustees’ strong views on these areas will influence whether a newer entrant is seen as the right counterparty for their pension schemes.

“Trustees that spend time considering whether and how to talk to new entrants are likely to get the most engagement."

Pearce suggested that trustees could also benefit from some motivated providers who are looking to get a foothold in the market, suggesting that this ‘early mover’ advantage could result in preferable contractual or commercial positions.

“Trustees should consider whether their circumstances and priorities mean that they should approach a new entrant for quotations," he continued.

"Planning will ensure trustees have the information they need to make decisions, and will let their pension schemes quickly lock in if they receive attractive pricing.”

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