An increasingly competitive UK PRT market, alongside favourable market conditions, is resulting in a fascinating and fast-paced landscape for PRT business. In this paper we discuss some of the current hot topics facing insurers.

State of the market

Business volumes and expectations for 2025 and beyond

Figure 1 shows PRT new business volumes (£bn) and the number of PRT deals between 2017 and 2025. There were approximately 300 deals written in 2024, totaling almost £50 billion of premium. As well as increased total volumes, there was also an expansion in the capacity of the established insurers, with six insurers writing over £5 billion of premium in 2024.

The PRT market is arguably at its most competitive level ever: there are now a record 11 insurers quoting on UK PRT business. Established insurers have continued to grow their market presence whilst there are a number of new entrants to the market — including Utmost, Royal London and Blumont.

Scheme demand for PRT transactions is expected to remain strong. Improved insurer pricing in Q1 2025, rising gilt yields boosting scheme funding levels and the continued focus on de-risking continue to drive the market. However, the Pension Schemes Bill changes to allow surplus extraction for well-funded defined benefit (DB) schemes have been a headwind on this momentum, in particular causing uncertainty during the first half of 2025. Overall, 2025 business volumes are likely to be similar, or perhaps a little lower, than 2024. High new business volumes are expected to continue over the next decade, with annual volumes in the range of £50–60 billion being forecast by many commentators.

The number of transactions is also on the rise, driven by insurers providing streamlined solutions that help small and mid-sized schemes secure deals more quickly, as well as smaller scheme sizes being targeted by new entrants. Examples of solutions on the market include Aviva’s Clarity, PIC’s Mosaic, Just’s Beacon and Legal & General’s (L&G’s) Flow. Many players continue to invest in streamlined operations, particularly for smaller schemes, which means that schemes with under £100 million of liabilities are able to access attractive pricing.

There continue to be other factors beyond the headline price that are being taken into consideration by trustees when selecting a provider, including administration quality, member experience, resilience to climate risk and alignment of investment with environmental, social and governance (ESG) principles.

Another factor of note is that in 2024 there was a substantial growth in the number of buy-ins still yet to move to buy-out. This may be a consideration for trustees looking at a buy-out, as some established players could have a sizeable backlog of schemes, whereas a new entrant to the PRT market does not.

Challenges for new entrants

Although the PRT market appears attractive given the potential size of the opportunity and the available returns, the hurdles for new entrants remain high.

New entrants require significant capital backing on entry, and whilst returns can be good, the payback period is long, particularly to fund growing business volumes over time. This makes the market more attractive to mutual or private capital structures, rather than public — a feature that we also see in the US PRT market.

New entrants will require staff with the specialist skills and experience needed to manage a PRT business, and there can be high demand for these people. Areas include pricing, origination, asset-liability management (ALM), capital modelling and management, and operations. When producing the documentation for the required regulatory approvals, entrants require individuals who have experience successfully obtaining regulatory approvals to carry out the analysis and then draft or review the required documentation.

New insurers must achieve operational efficiency for the business to be profitable and competitive. Firms need to consider the time to get regulatory approvals for the matching adjustment (MA) and internal models, before which levels of new business are likely to be constrained. Firms then need to be operationally ready for the volume of new business, and need to be flexible and adaptable as opportunities and challenges emerge. For example, pricing models will likely shift from bespoke simple approaches to models that integrate into wider operations including reporting and capital management.

Of course, new entrants will get nowhere without origination capability. The origination team need relationships within the pensions industry (with employee benefit consultants and with trustees), so they can write their first few deals and establish market presence and confidence. Clear messaging on brand and values are important, especially with smaller schemes.

There are of course other ways for investors to deploy capital into the PRT market, without setting up a UK insurer. These include establishing an offshore reinsurer, investing in a sidecar (through this has not been done for UK PRT business yet) or acquisition of an established firm, as was the case for Athora with its recent full acquisition (subject to regulatory approval) of Pension Insurance Corporation (PIC).

Market innovation and deal structuring

The underlying competition is leading to more innovation. For example, M&G has launched Value Share BPA, which effectively involves setting up a captive reinsurer to facilitate a deal structure whereby the corporate sponsor shares in some of the risk and reward of the PRT deal. This solution might suit some trustees of large schemes who wish to retain some upside, but is not without complexities. M&G also announced in its 2024 full-year results presentation that it is planning on launching a with-profits BPA product, which is in the design phase.¹ Some insurers also have their own ‘middle ground’ solutions aimed at schemes that cannot yet afford a transaction. One example is L&G’s Insured Self-Sufficiency (ISS)² solution, which provides a degree of longevity protection and a cashflow matched investment strategy, with the scheme retaining the investment risk and longevity risk in excess of a 1-in-200-year event.

In some cases insurers are more willing to be flexible in response to trustees’ wishes. For example, deferred premium business (where a proportion of the premium is deferred upfront) has become increasingly common, and in some cases trustees have obtained solvency-triggered termination rights, whereby trustees can terminate the PRT agreement during the buy-in phase under the circumstances that the insurer’s solvency coverage ratio falls below a specific threshold. We comment on these termination rights further in the section below on regulation.

One new alternative to PRT transactions are pension superfunds, which consolidate defined benefit schemes. The UK’s first commercial superfund, Clara Pensions, has now written three deals, but superfunds are very much seen as a route to buy-out, for schemes that cannot quite afford or are otherwise unable to enter into an insurance solution.

Rates and spreads

Gilts, swaps and spreads

UK interest rates at all durations have remained high in the first half of 2025, although this is not a UK-specific feature (they are similar to US rates). Gilt-swap spreads remain at unusually high levels, reflecting a combination of government borrowing needs, inflation concerns and quantitative tightening policy. In contrast, credit spreads are historically low, despite economic and geopolitical uncertainty.

Higher gilt yields generally improve scheme solvency positions, increasing the affordability of insurance solutions. For insurers, the relative attractiveness of gilts compared to credit has increased (both in terms of the gilt returns and the associated capital requirements), and we observe a slower and more considered deployment of assets from gilts to credit, especially for privately owned insurers.

For de-risking transactions where assets are transferred in specie, insurers are generally showing a strong preference for receiving gilts.

Evolving investment strategies and asset optimisation

In light of the challenging economic environment, shaped by geopolitical factors, increased inflation and uncertainty over US tariffs, both pension schemes and insurers continue to reassess their investment strategies, to enhance returns whilst balancing risks. This has led to a search for new and alternative asset classes, such as private credit and infrastructure, as well as direct lending and collateralised loan obligations. However, it remains uncertain whether insurers can fully benefit from all of these investment opportunities, given the constraints of MA eligibility.

Greater investment in alternative assets also introduces challenges around having the necessary specialist skills and resources to understand and manage the associated risks. Whilst some firms are forming strategic partnerships with investment managers to access this expertise, sound management practice and regulations such as the prudent person principle still require the in-house teams to possess a high level of knowledge and competence.

Asset optimisation is being facilitated by more frequent and higher-quality management information, coupled with the consolidation of team experience gained over the past decade. Additionally, back-book optimisation is gaining momentum, as existing portfolios are being reassessed in light of current market conditions and asset opportunities.

Streamlining operations

Amid increasing business volumes and a shifting investment landscape, PRT insurers face mounting pressure to streamline and optimise their operations. Investment in digital infrastructure is on the rise, with insurers adopting technology and AI to improve the onboarding process for new schemes and enhance system efficiency, particularly for smaller schemes. These advancements are likely to attract some trustees and their advisers, serving as a valuable differentiator.

In customer service, insurers are leveraging AI to identify vulnerable customers, ensuring they receive the appropriate level of support and that communication methods are tailored to those with specific needs. This is particularly significant given an aging customer base.

Effective liquidity and capital management are essential for PRT insurers to meet long-term obligations and ensure financial stability. We are seeing the adoption of more advanced techniques to measure and monitor these areas, particularly as investments in alternative and illiquid assets increase. This trend underscores the need for enhanced attention to medium- and long-term liquidity and solvency forecasts.

Regulatory developments

The PRA continues to focus on the PRT market in several areas.

There is a consensus that MA approvals are now smoother and more streamlined than previously, with the PRA having taken specific measures towards this. The proposed MA Investment Accelerator, set out in consultation paper (CP) 7/25 and due to become effective at the end of 2025, is generally considered a welcome development for insurers to broaden their investment exposure. However, very well-established players will already have MA permissions for most or all but the most complex assets and the 5% of best estimate liability constraint will make this largely unworkable for very recent entrants. Some firms are developing MA applications for assets with highly predictable cashflows, though this is far from universal.

Life Insurance Stress Test (LIST) 2025 submissions have now been made. The publication of results is due in November 2025 in two stages, covering firstly aggregate results and then individual entity results. The PRA has been quite clear about the format of the disclosures and expects firms to release their own additional information concurrently. The property stress element appears to be strongly calibrated and, in part related to this, we note that several firms are relooking at their equity release mortgage structures.

Firms submitted their self-assessments regarding policy statement PS 13/24 on funded reinsurance in October 2024. The PRA responded to individual firms in spring 2025, and this will be an area that it will continue to engage on. A likely area of scrutiny will be how exposure limits relate to solvency impact upon recapture of the reinsurance. Although the practical and regulatory hurdles for funded reinsurance are high, several insurers continue to see it as a useful tool for managing capital flow, along with other benefits, and there is still quite a wide range of different structuring approaches.

The PRA recently wrote to chief risk officers following its thematic review on solvency-triggered termination rights (STTR),³ asking firms to specifically consider a full range of risks that could crystallise if these clauses were triggered. These risks include impacts on the composition of firms’ remaining asset portfolio, liquidity position and the management of their MA portfolios, besides operational challenges if STTR clauses are triggered in a stress situation. The PRA noted limitations in some firms’ analysis but did also comment on good practice they had observed such as on STTR implementation planning.

Conclusions

The volume of schemes seeking an insurance solution remains high, and returns continue to be attractive for well-focussed and efficient firms.

Pension scheme trustees are increasingly taking into account a range of factors when assessing insurers, including use of technology, streamlining and product innovation, as well as straightforward pricing.

Established insurance players must continually evolve their business to make the best use of capital capacity, stay competitive, manage the long-term risks and adapt to ongoing regulatory change.

New entrants certainly face challenges, but the recent successful entrants show that these are not insurmountable.

High gilt and swap rates continue to produce positive effects for both schemes and insurers, whilst the use of alternative asset classes brings new risks and challenges to providers.

It will be interesting to see if the current market conditions continue to prevail in the coming years, and how the current levels of competition and innovation within the market develop.

How Milliman can help

Our consultants have advised many clients in the PRT arena, ranging from well-established firms to those exploring their entry options.

Some examples of areas of work that we have carried out include the following:

• Internal Model and MA applications, including technical analysis and design, documentation and validation
• Advising new entrants on strategic route to market and fully supporting them in their detailed strategy, planning and regulatory applications
• Operating model design for different elements of the PRT insurer value chain including investments, ALM, pricing and reporting
• Liquidity and collateral management
• Secondments of experienced staff to pricing, investment solutions, risk and other areas

If you would like to discuss how Milliman could assist you, please reach out to one of the paper authors or your usual Milliman contact.

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¹ M&G. (19 March 2025). Financial strength, simplification, growth. Retrieved July 17, 2025, from https://www.mandg.com/~/media/Files/M/MandG-Plc/documents/Financial%20results/2025/mgplc-full-year-2024-results-presentation.pdf.

² Legal & General. De-risking redefined: Legal & General’s ISS. Retrieved July 17, 2025, from https://www.legalandgeneral.com/landg-assets/institutional/pension-risk-transfer/what-we-offer/iss/legalgeneral_iss-flyer_march-2021-update.pdf.

³ Truran, G. (4 July 2025). Chief risk officers of life insurance firms writing bulk purchase annuities. Bank of England PRA. Retrieved July 18, 2025, from https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/letter/2025/solvency-triggered-termination-rights-clauses-in-bpa-transactions-letter.pdf.