Brookfield Sees £500 Billion Opportunity in UK Pensions Foray

Brookfield, a Canadian private capital giant, has reportedly applied to establish an insurance company in the UK, aiming to enter the booming pension insurance market. According to reports, Brookfield's insurance arm, brookfield Reinsurance, has filed paperwork with the Bank of England's prudential Regulation Authority (PRA) to set up a new insurer. The application process is understood to typically take six months, but could take longer if the regulator raises questions over Brookfield's potential investment strategy.



The move was first signalled by Sachin Shah, chief executive officer of Brookfield Reinsurance, back in May, saying that the business plan was to enter the UK market and start "bidding on transactions" by the end of the year. Brookfield's intent to enter the UK bulk annuity market follows a recent announcement by Royal London and Utmost, bringing the market to 11 participants and demonstrating just how vibrant the UK bulk annuity market is.

Charlie Finch, partner at LCP, commented on the announcement, stating that Brookfield already participates in both the US and Canadian bulk annuity markets and has the potential to be a significant provider in the UK market. Finch continued, "Their entry will add further capacity and competition as record numbers of defined benefit schemes enter into buy-ins and buy-outs, with volumes of up to £600bn predicted over the next 10 years."

Adam Davis, managing director of K3 Advisory, noted that this is the "second great wave of new entrants to this market," with at least three other new entrants at varying stages of readiness to enter the market and expects to see more "as we move into 2025."

Richard Gibson, partner at Barnett Waddingham, welcomed Brookfield's approach, stating that the firm is currently working with "multiple insurers" at an advanced stage of entering the market. Gibson added that greater choice is a "boon" for pension schemes, but trustees will want to "carefully pick the right insurer to work with if they want members and employers to get the best deal in the buyout market."

Nikesh Patel, head of client solutions UK at Van Lanschot Kempen, expects additional new entrants over the course of this year and next, noting that while this will increase the capacity to undertake new transactions and increase competition for deals, the underlying capacity constraints remain. Patel warned that gaining the Financial Conduct Authority's approval is both expensive and time-consuming, creating an additional barrier to entry and limiting the number of new players.

Ian Aley, head of transactions at WTW, agreed that barriers to entry are high, with the PRA focused on ensuring long-term security for policyholders. However, he noted that many consider the "prize" worth it, with a material pipeline of new premiums to be written over the next decade. Aley continued, "As we've been speaking to potential new insurers, it's interesting to hear their differentiators and the target markets they have, which should open up more opportunities for UK pension schemes."

In conclusion, Brookfield's entry into the UK pension market presents a significant opportunity for the company to grow, create employment, and invest domestically in the UK market. With over £500 billion of demand for pension buyouts expected over the next decade, the UK represents a substantial market for Brookfield to tap into. As a new entrant, Brookfield will bring additional capacity and competition to the market, driving innovation and ultimately benefiting pension funds seeking to manage their risks more effectively.