A typical consequence is that insurers will not accept all-risks policies, meaning that the pension scheme has to retain some of the basis risk and can be a barrier to deal execution.
Expanding capacity?
If the industry wants to grow the market beyond the current £30bn to, say, £50bn, maybe it is time for insurers to work together to streamline the deal execution process.
Today’s multiple round tender processes are extremely resource intensive and time consuming.
One potential approach could be a bureau that identifies schemes close to execution and enables insurers to work with pension schemes, for example, to help with investment strategy; use standardised cash flows to provide schemes with pricing on a consistent basis and aid de-risking timing; and streamline adviser time, aligning insurer, reinsurer and pension scheme actuary views on longevity and pricing.
Most market players are confident that market demand for retail and institutional decumulation products can only increase.
This may sound like good news for all, but of course no insurer can take their own future success for granted.
Waheeda Narker is retirement & decumulation segment lead, insurance consulting and technology at WTW
