A record year for the risk transfer market means that £0.25trn of pension scheme longevity risk has been insured since 2007, according to analysis from Hymans Robertson.

The actuarial firm said this milestone had been reached following the completion of £43.8bn of buy-in and buyout transactions in 2019, up from 2018’s previous record high of £24.2bn.

Hymans Robertson head of risk transfer, James Mullins claimed that the UK pension scheme risk transfer market “is leading the world in terms of volume, maturity and innovation”, adding that the insurance of £0.25trn worth of pension scheme longevity risk amounted to “around 15 per cent of all defined benefit pension scheme liabilities in the UK”, up from 1 per cent a decade ago.

The analysis showed that £51.6bn-worth of liabilities were covered in 2019, with the value of buy-ins standing at £26.2bn, compared to the £17.5bn value of buyouts and £7.8bn value of longevity swaps.

The report demonstrated that the second half of the year saw the most activity, with 87 buyout and buy-in deals completed, compared to 66 in the first six months.

The average size of these transactions was shown to have increased by 39 per cent compared to the year before, rising to £286m from £206m, with Rothesay Life's £1.63bn coming in as the highest average deal size on a firm by firm basis.

The company’s analysis indicated that over 75 per cent of all buy-in and buyout transactions, equivalent to £34bn, were completed by Rothesay Life, Legal & General and the Pension Insurance Corporation.

Despite the fact that five transactions breached the £3bn mark in 2019, compared with just one in prior years, the report from Hymans Robertson said demand had not been driven by larger pension schemes alone, as the year saw over £15bn worth of transactions for less than £1bn.

Mullins said: “The last decade saw the market for pension scheme buy-ins and buyouts truly come of age as it grew from relative infancy to the impressive £43.8bn of premiums we saw written in 2019, an eight-fold increase compared to 2010.

“There were five buy-in and buyout transactions that were each over £3bn in 2019, compared with only one such transaction ever occurring in prior years and inevitably these mega transactions hit the headlines.

"However, interestingly, the smaller transactions of less than £1bn each still accounted for around £15bn of buy-ins and buyouts during 2019 alone, which is a further sign of how this market is maturing.”

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