The turmoil in the economy and general increase in buyout prices has had a big impact on the buyout market. The latest Market Watch report from Pension Capital Strategies Ltd (PCS) analyses developments in the market for 2009 to date.
It is encouraging for sponsors and trustees that UK based insurance companies have not required any support from the government. Regardless of this, as scheme funding levels have deteriorated and sponsors have been less able to fill the buyout gap, the market has contracted since 2008.
Tiziana Perrella, Head of Buyout Services, PCS, says: “Although 2009 has been disappointing in terms of deal volumes when compared to 2008, the figures must be considered in the context of the wider economic climate. Given what has happened to the wider economy, the figures look reasonably healthy. All insurers maintain that they have a healthy pipeline for Q4 and we expect more deals to conclude prior to the year end, with up to £4bn worth of deals being written over the year”.
PCS’ analysis shows that prices seem to have stabilised over the recent months. However the final requirements of Solvency II may have a significant impact.
Tiziana Perrella said: “We believe that insurers have already included a margin in their pricing basis to reflect the expected requirements of Solvency II. Provided there is some recovery in the economy, we believe that the buyout market will continue to be healthy in 2010. In particular, it is now easier for smaller schemes to obtain competitive quotes and therefore we expect increased activity in this segment of the market”.
The full PCS Buyout Market Watch Report is available by clicking here :
