A poll in a recent webinar held by LCP highlighted the strength of appetite for a multi-insurer auction process when it comes to brokering a buy-in transaction, with almost three quarters of the respondents who expressed a preference indicating that this is their preferred approach for their scheme.  

The poll was conducted during LCP’s recent webinar, ‘A seismic shift in the ​buy-in/out market – ​how can my scheme adapt?’, with over 70 pension scheme trustees and corporate sponsors voting. In an earlier poll, 80% of the audience indicated that they were either already fully funded on buy-out or within five years of being so.  

Despite the majority preference for multi-insurer processes, there are situations where a sole insurer process is the optimal approach. Of the respondents preferring a sole insurer approach, around 35% indicated this was because they wanted to do a follow-on transaction with an incumbent insurer. Around 20% said it was due to their scheme having particularly complex requirements, with a little under 45% citing other reasons. 

LCP’s latest de-risking report found that the market for buy-ins/outs has become much more challenging in 2023 on the back of soaring numbers of schemes approaching insurers for quotations. This has led to a drop-off in the number of insurers participating in each buy-in process, with more schemes running sole insurer processes as a result.   

Despite the busier market, LCP’s experience is that well-presented schemes can still run multi-insurer auction processes if they wish and that pricing remains highly competitive even for the smallest schemes. In the second half of this year, LCP has helped 14 schemes under £100m run successful insurer selection processes, with 11 of these attracting multiple insurers; the smallest was £10m and received three quotations. This success for smaller schemes is driven by LCP’s streamlined buy-in and buy-out service, with its straightforward “no-nonsense” approach and pre-agreed enhanced contractual terms. 

Ruth Ward, Principal in LCP’s pension de-risking practice, commented: “The message we have for pension schemes is that they shouldn’t feel they are forced to go down a sole insurer route. The market may be much busier, but, in our experience, a well-presented scheme with a well-run process can access a multi-insurer process if they wish, whatever their size. Schemes’ individual circumstances will dictate what is the right approach for them, but in many cases, running a multi-insurer process will result in the best outcome. 

“Our poll results show that there is significant appetite from schemes for multi-insurer processes. Schemes should discuss with their risk transfer adviser how this is best achieved. For smaller schemes, the best approach will often be to follow a well-established streamlined process. Our analysis shows insurer capacity being maintained at the smaller end of the market, with LCP’s streamlined process for smaller schemes receiving multiple insurer quotes in the vast majority of cases. 

“The most important element of an effective process is having well-engaged insurers keen to direct their pricing firepower and a share of their finite pipeline of higher-yielding assets at your transaction. With soaring numbers of schemes seeking pricing, it’s more important than ever to carefully plan your approach so as to position yourself effectively with insurers and secure strong engagement whatever your preferred route to market.”