Aon’s 2024 UK Risk Settlement Market Update

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2024: A Year of Unprecedented Milestones in the UK Risk Settlement Market

Aon, a leading firm specializing in risk management and professional services, has unveiled its much-anticipated 2024 UK Risk Settlement Market Update. The report underscores a year marked by significant achievements in both the bulk annuity and longevity swap markets.

In 2024, the UK bulk annuity market experienced remarkable activity, shattering previous records in terms of both transaction volume and the number of deals executed. Total bulk annuity transactions soared to an unprecedented £47.6 billion, encompassing 293 deals. This represents a substantial increase over the previous record of 227 deals in 2023.

The latter half of 2024 was exceptionally noteworthy, culminating in £32.5 billion worth of transactions—an all-time high for any six-month period. Notably, 12 deals exceeding £1 billion each were finalized during this period, setting a record for any half-year.

Aon attributes this surge to several factors including robust reinsurance market capacity, substantial insurer solvency surpluses, and innovative product offerings like streamlined pricing models, which have made transactions more accessible for smaller schemes.

Interestingly, approximately 78 percent of the deals completed in 2024 were under £100 million, indicating the market’s broad capacity to accommodate schemes of varying sizes.

Though the longevity swap market was somewhat quieter than in previous years, it still recorded £5.8 billion in transactions in 2024. This was a decrease compared to recent years, largely due to smaller transaction sizes, with two deals valued around £400 million each.

Nonetheless, with strong funding positions, many pension schemes opted for bulk annuities instead. Despite the reduced volume, the longevity swap market is poised for a resurgence in 2025, with projections exceeding £15 billion in transactions by year-end. This anticipated rebound is driven by ongoing deals involving major schemes such as the BT Pension Scheme and two Lloyds Banking Group pension schemes.

This trend also highlights the increasing capability of longevity swaps to hedge non-pensioner liabilities, broadening their traditional focus on in-payment risks.

Aon’s report also highlights a growing trend in 2024 of restructuring existing longevity swaps. Several previously executed swaps were successfully converted into bulk annuities, a move driven by evolving scheme objectives and circumstances.

The dynamics of the bulk annuity market are also shifting, with the entry of new insurers such as Utmost and the re-entry of M&G. This expansion is intensifying competition and providing additional capacity to the market. In 2024, Just Group accounted for over 40 percent of all transactions.

Furthermore, Aon’s report emphasizes the increasing activity within the Superfund market, with Clara taking a leading role. Clara completed a £600 million transaction with the Debenhams Retirement Scheme, restoring full benefits for 10,400 members. Additionally, Clara marked its first deal with an active business through a £230 million transaction with the Wates Pension Fund.

This evolving trend demonstrates that Superfunds are becoming increasingly viable for a broader range of pension schemes, including those with active sponsors. It is expected to stimulate interest from trustees and sponsors seeking alternatives to traditional insurance solutions.