Annuity pricing for 2018 is set to remain attractive as it continues to deliver better yields than comparable low-risk assets for pensioner transactions, Aon has found.

According to Aon’s UK Risk Settlement Market Bulletin for February, prices have improved due to illiquid and private asset opportunities for insurance companies, a strong market supply of capacity and attractive longevity reinsurance.

The bulk annuity market is expected to experience record volumes in 2018, while having already experienced perhaps the busiest Q1 since 2008, most deals are expected in the last three quarters of the year.

It comes as bulk annuity providers are increasingly comfortable with combining member options exercises with annuity transfers.

The report also notes that as pension schemes and annuity providers search for yields has led them to more illiquid assets, and warned against being caught into asset holdings for a long period.

Furthermore, death rates for 2017 hit circa 525,000, and increase from 2015 (circa 521,000) and 2016 (circa 517,000).

The report also expects that Brexit will have “no material impact” on the bulk annuity market.

Insurance firms are thought to have significantly reduced their exposure to weaker European countries sovereign debt and that it will continue to follow the regulatory regime Solvency II.

Aon have also warned that insurers will need to make amendments to their existing annuity contracts in order to comply with the increased regulations of data security under GDPR.

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