Rothesay agrees $3.4 billion deal for Thales in hot UK pensions insurance market By Reuters
By Carolyn Cohn
LONDON (Reuters) – Insurer Rothesay has agreed a 2.7 billion pound ($3.42 billion) corporate pensions insurance deal for the Thales UK pension scheme, it said on Friday, adding to a recent run of large deals in the sector.
Such deals, also known as bulk annuities, are heading for a record year as company pension schemes are finding it more affordable to buy the insurance following rising interest rates, industry sources say.
The deal insures all members of the scheme – more than 16,000 – and was supported by an upfront cash commitment by Thales, Rothesay said in a statement, without giving the size of the commitment.
Thales UK is a unit of France’s Thales, Europe’s largest defence electronics maker.
Rothesay said it had completed new bulk annuity business this year totalling 12.7 billion pounds.
Legal & General last week said it had written a total of 13.4 billion pounds worth of pension risk transfer deals this year globally, up from 9.5 billion pounds last year.
Rothesay and Legal & General, two of the biggest players in the UK market, struck two deals totalling 8.8 billion pounds last week.
The bulk annuity market normally runs at a rate of about 30 billion pounds a year, but industry sources expect volume to top 40 billion this year.
Regulators are concerned that these deals are supported by reinsurance from offshore players, often private equity funds, and that bulk annuity providers may be underestimating the risks from those investments.
But this has not deterred possible new entrants to the market, including private equity firm Brookfield, industry sources say.
“There has been interest from a wide range of potential investors,” said Iain Pearce, a partner at consultants Hymans Robertson, without naming any.
“Given the complexity of establishing a new insurer from scratch, the barriers to entry may be lower for potential new entrants who have an existing structure or solution.”
($1 = 0.7901 pounds)
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