Management Consulting

In 2020, the UK risk settlement market faced challenges due to a decrease in mega transactions, which had characterized the previous year. However, mid-sized and smaller pension schemes began to leverage innovations from the larger transactions of 2019, which included significant deals over £2.5 billion for companies like Asda and Rolls-Royce. Despite the absence of these large deals, the market was expected to exceed £50 billion by the end of the year, demonstrating resilience and adaptability among smaller schemes. Aon’s Risk Settlement team noted that the lessons learned from previous jumbo transactions allowed mid-sized schemes to enhance their approach to risk settlement. These schemes integrated member options exercises with bulk annuity transactions, utilized deferred premiums, and accommodated illiquid assets, showcasing a more sophisticated understanding of the market mechanics. This evolution in strategy has led to better pricing and terms for these schemes, as they are now more prepared and clear about their objectives when approaching insurers. The increased clarity and preparedness among schemes have resulted in a notable rise in the number of small schemes moving towards buyout solutions. This trend reflects a growing recognition of the importance of being well-organized and having defined goals, which ultimately unlocks better pricing opportunities that may not have been available previously. As a result, the risk settlement market has seen a shift towards more strategic and informed transactions, benefiting schemes of all sizes.