Highest quarter ever for DB risk transfer deals

The value of traditional buyout and buy-in deals increased to £1bn during the period and the three ground-breaking longevity swap deals - sealed by Babcock International and RSA - were worth £2.9bn.

Senior liability management specialist James Mullins said Q3 2009 would be remembered as an "important milestone for the longevity swap market".

He said: "For example, as well as the completed deals already in the public domain, there is much more on the horizon with several of the longevity swap providers now having ‘exclusivity' on other longevity swap deals worth well in excess of £1bn which could complete in the next few months, subject to contracts."

Mullins added: "In addition, in view of the significant interest - particularly from large UK pension schemes - other established insurers, including Legal & General, seem likely to enter the longevity swap market in 2010, so no longer confining themselves to the buy-in/buyout market.

"Indeed, Legal & General will already provide an indication of their pricing basis for longevity swaps."

Hymans Robertson partner Richard Shackleton said he expected pension scheme de-risking would continue to increase in the medium term as volatility had heightened trustee and sponsors appetite to reduce risks.

He said: "Indeed, many trustees are now working towards a secondary ‘self-sufficiency' funding target which they are then using as a benchmark to measure risk, against which trustees are able to take practical decisions to reduce risk over time.

"Putting in place this kind of longer term strategy ensures that trustees are ready and able to take decisions quickly so that they do not miss valuable short term opportunities to ‘bank' profits and reduce risks when market conditions improve."

Shackleton added it was likely some "highly material longevity swaps" would be completed before the end of the year.

Value of buyout/ buy in deals completed (Number of deals)

Value of longevity swap deals completed (Number of deals)