Private equity giants muscle into UK’s £1.4 trillion pension risk-transfer market
Private equity giants are ramping up their ambitions in Britain’s pension risk-transfer sector, taking bold strides into a market worth over £1.4 trillion. In just a month, deals totalling $10.7 billion have been inked, and that’s just the beginning.
A wave of defined-benefit pension liabilities is being offloaded by British firms eager to streamline operations. It’s opened the door for heavy-hitting global asset managers like Brookfield Corp. and Apollo Global Management to swoop in.
Brookfield Wealth Solutions (BWS) is wasting no time. Under the leadership of Sachin Shah, the firm has agreed to snap up Just Group Plc, a move priced at a staggering 75% premium.
“We are combining Just with our UK insurance unit, Blumont, to hit £50 billion in annual pension buyouts,” Shah said.
That target puts them on a direct collision course with established heavyweights like Legal & General Group Plc, which has set its sights on £65 billion by 2028.
Not to be outdone, Apollo-backed Athora has struck a major deal to acquire Pension Insurance Corp., a significant player formerly supported by CVC Capital Partners, HPS Investment Partners, and the Abu Dhabi Investment Authority.
And then there’s Blackstone Inc., which is now in bed with L&G, Their new partnership will generate private credit investments tailored for annuity markets.
The pension buyout frenzy is far from short-term. Consulting firm LCP forecasts that pension risk transfer deals could hit £500 billion by 2033.
That projection has asset managers circling. Recurring fees, scale, and the chance to deploy massive capital reserves in private credit and infrastructure make this sector a gold mine for long-horizon investors.
But while the money floods in, UK regulators are flashing warning lights. The Prudential Regulation Authority (PRA), under the Bank of England, has sounded alarms over the growing influence of private equity in the insurance space.
Their concern? That offshoring or PE-linked reinsurance deals could backfire during a downturn.
“We are keeping an eye on recapture risks, where insurers could be forced to retake pension obligations at the worst possible time,” the PRA stated.
That scenario could see insurers selling assets in distress, especially if private equity-backed asset values slide, jeopardising solvency margins.
The 2023 collapse of Cinven-owned Eurovita, which couldn’t survive bond market turbulence, remains a cautionary tale for regulators and investors alike.
Later this year, the Bank of England will publish the results of an industry-wide stress test examining insurers’ vulnerability to market shocks.
Though the defined-benefit pension sector may peak within a decade, that’s not slowing down the ambitions of alternative asset managers. Retail annuities, for instance, offer enticing long-term potential.
“We see structural growth in broader life insurance, not just corporate pensions,” said Moody’s analyst Will Keen-Tomlinson.
There’s political backing too. UK Chancellor Rachel Reeves praised Brookfield and Athora’s market entry, branding it “a vote of confidence in the UK economy.”
With competition intensifying and regulatory eyes sharpening their focus, Britain’s pension risk-transfer space is set for more upheaval. For now, the only certainty is change, and private equity isn’t waiting on the sidelines.
