Legal & General (L&G) has completed a £230 million bulk annuity deal, which it claims is the UK’s largest medically underwritten bulk annuity deal with a UK defined benefit (DB) scheme.
The mounting burden of DB scheme liabilities because of factors such as increased life expectancy of members, even where schemes are closed to new members, means UK employers are increasingly looking to strike bulk annuity deals.
This most recent deal by L&G is of a type called a buy-in, which means the bulk-annuity policy is held by the scheme trustees as an asset which will pay the members’ benefits.
L&G said its pension risk transfer team has written over £1.1 billion of business during the fourth quarter of 2015.
In October L&G announced its first pension risk transfer deal with the US subsidiary of Royal Philips for approximately $450 million (£303 million), and in December it completed a €200 million (£147 million) reinsurance deal with ASR Nederland NV, a Dutch Insurer.
The £230 million deal announced today is L&G’s first to be medically underwritten, meaning it takes members’ health into account, such as medical history, smoking habits and so on, when pricing the bulk annuity offer.
Kerrigan Procter, managing director of L&G retirement, said: ‘The deal signs-off an excellent year for the business, with our entry into the US and Dutch pension risk transfer markets, and our first medically underwritten bulk annuity deal completed. We enter 2016 with a strong international pipeline. I’m confident we’ll build on the success of 2015 next year.’
Pension providers have increasingly looked to the bulk annuity market following the announcement of the pension freedoms in 2014 and subsequent sharp drop in sales of individual annuities.
Source New Model Adviser.