UK life insurers wrote about £10 billion in bulk annuities during the first half of 2025, down from £15 billion in the same period last year, according to Fitch Ratings. The slowdown reflects fewer large transactions, with pipelines for some insurers expected to ease further as well-funded pension schemes take advantage of new government measures to release surpluses back to sponsoring employers. Insurers may face reduced opportunities for new business, while brokers will need to adapt their strategies to identify and pursue smaller or more complex deals.
Despite the softer first half, Fitch forecasts full-year volumes of around £40 billion, compared with £48 billion in 2024. Activity is expected to remain strong over the medium to long term as pension scheme sponsors continue to de-risk their balance sheets by transferring liabilities to insurers. The number of transactions is likely to keep rising, supported by growth in the small-scheme segment, even if annual volumes fluctuate.
New business profitability fell in the first half of 2025, with insurers facing lower volumes, tighter credit spreads and heightened competition. These pressures have been partly offset by profit releases from in-force portfolios and cost efficiencies. Competition is intensifying across all deal sizes, driven by new entrants, product innovation and stronger appetite among incumbents, according to the note.
Fitch said capital positions remain robust. Solvency II ratios are generally around, or above, 200%, underpinned by solid capital generation and elevated long-term interest rates. While solvency ratios are expected to moderate as insurers deploy more capital into private assets and execute on pipelines, they should remain above stated risk appetites.
IFRS shareholder equity declined at most firms, largely due to increased capital distributions. Net-of-tax contractual service margin (CSM) growth was subdued, reflecting weaker new-business profitability and lower transaction volumes.
Beyond annuities, workplace savings flows held steady in the first half of the year, supported by the UK’s auto-enrolment regime. Retail wealth flows showed signs of improvement, though they continue to face headwinds from persistent high interest rates and broader macroeconomic uncertainty.
The UK bulk annuity market is dominated by a handful of large players, including Legal & General, Aviva, Rothesay, and Phoenix Group. These firms continue to compete aggressively for deals, while newer entrants are increasing competitive pressure, particularly in the mid-sized and smaller scheme segments. Fitch noted that the long-term fundamentals of the market remain strong, given the continued demand from pension schemes to de-risk.
