A] Prelude
For more information on pension systems, risk and coverage, feel free to visit our dedicated webpages:
https://expatpensionholland.nl/global-pillars-systems
https://expatpensionholland.nl/global-investments-risks-0
https://expatpensionholland.nl/global-social-security-coverage
For even more information feel free to visit the following external sites:
https://www.rgare.com/knowledge-center/article/dutch-pension-risk-transfer--a-market-in-transition
https://www.aon.com/en/insights/articles/seizing-opportunity-in-a-booming-pension-risk-transfer-market
B] The Issue
The strong momentum in the UK pension risk transfer (PRT) market is a well-known and well-developed trend. The last few years have been highly active in terms of both deal flow and new entrants as participants maintain a bullish position on the opportunity.
As one of the providers of longevity reinsurance, we help insurers, as well as pension schemes, execute buy-ins and buyouts to manage the implications of changing life expectancies. This gives us an interesting perspective on what is taking place in the market today and the trends that will define the coming 12 months.
C] The Details
The global economic environment in 2025 has been volatile, to say the least, with any predictions made last year likely needing reappraisal. With that in mind, as we approach the second half of the year, here are five key trends that we are focused on.
1. Volumes In UK
Starting with the least controversial view: the PRT market will continue to be an attractive one for both pension schemes as well as insurers, with deal flow remaining highly active and competitive. Most consultants predict that 2025 volumes will be similar to 2024 levels despite recent market volatility. This is because fundamentals in the UK landscape remain very robust with higher interest rates and continued good funding positions, especially for well-hedged schemes, driving the desire to de-risk.
If anything, the experience of schemes during the market volatility we are experiencing is likely to be a further driver in the desire of many to de-risk: even those with healthy surpluses will have seen how quickly these can become uncomfortably eroded in the face of market decline.
2. Manage Longevity Risk
Despite the above considerations, and the volumes of PRT taking place, we are also seeing the strong positions of pension funds encourage some to choose to run their plans on. In particular, banks and financial services players may feel they have the expertise required to effectively manage market risks.
However, regardless of whether choosing risk transfer or run on, the ‘risk’ of people living longer in the future can be a challenging one to manage. Access to the capital and expertise needed to help manage changing developments in life expectancy is an important major priority for many. Our experience has shown that this becomes more valuable during times when future trends in longevity expectations seem most uncertain.
3. Funded Reinsurance
A dynamic market inevitably means new and creative solutions being trialled and implemented. Funded reinsurance is perhaps most prominent and has come under scrutiny recently, with the PRA imposing counterparty risk and certain collateral requirements
We believe funded reinsurance will continue to play a role in the derisking strategies of most PRT insurers, although it will remain modest. Most notably due to its ability to help source assets on a more global level. Managed appropriately, anything that enables access to a wider pool of assets, and asset classes, to offset liabilities is a good thing for insurers and indirectly for pension schemes.
4. More New Entrants
A simple point but an important one. We saw a number of entrants last year and while the pace may slow down in the future, we still anticipate one or more players to come into the market. This is good news for pension funds, which will in turn see greater supply and more competitive pricing.
5. Increased Activity Beyond UK
Although the UK has developed into the most mature market as compared to any other country in Europe, we are excited about the opportunities arising elsewhere, notably in The Netherlands.
The pension reform that passed into legislation in 2023 means that we are seeing demand ramp up, especially with a new government settling in and increasing certainty that these reforms are here to stay. Most consultants are now predicting €20-30bn of activity over the next three years, and optimism is only increasing.
D] Finally
Fundamentally, the de-risking trends we are familiar with in the UK are being seen globally, driving demand for PRT and the longevity hedging solutions that sit behind this as enablers.
While near-term volatility can be unsettling, the trends and fundamentals driving activity remain compelling.