The increase in interest rates over the past two years has significantly improved the health of corporate pension plans, enabling companies to transfer their liabilities and assets to insurers. According to consultancy LCP, approximately £40 billion worth of such deals are expected this year, just shy of the 2023 record.
Sources close to the matter reported that Brookfield’s insurance business has filed with the Bank of England’s Prudential Regulation Authority to set up a new insurer. Toronto-based Brookfield had considered entering the UK corporate pensions market through an established provider. Last year, Brookfield, Apollo, and others considered bidding for Pension Insurance Corporation, a provider that acquires company pension plans through bulk-annuity deals, but the owner’s valuation was not feasible.
Establishing an insurance business will be challenging as the market is dominated by large bulk annuity providers such as FTSE 100 insurers Phoenix Group and Legal & General. The application process can take at least six months, potentially longer if regulators have questions about Brookfield’s investment approach in managing pension schemes.
Both Brookfield and the Bank of England declined to comment.
The move by private capital groups into Britain’s corporate pension market aligns with a broader trend of these groups expanding into the global life insurance sector. Brookfield’s insurance operation, a separate entity with its own balance sheet, was founded in 2020 and now controls more than $100 billion in assets under management.
In May, Sachin Shah, CEO of Brookfield Reinsurance, expressed his ambition to enter the UK market, stating the company “should be in a position by the end of the year where we’re actually bidding on transactions” and would “start small and eventually migrate into the larger transactions”. Brookfield’s US business has completed $3 billion in transactions in the past year.
Brookfield also owns a majority stake in Oaktree Capital Management, a backer of UK life insurer Utmost, which is also planning to enter the market. Brookfield would not be the first private company to enter the market, as firms like PIC and Rothesay are already operating.
Private capital groups argue that they can use their expertise in alternative investments to provide safe yet high-yielding assets for the pension plans they own. However, regulators have been increasingly scrutinising investment strategies that deviate from the conventional holdings of life insurers.
Pension consultants view the arrival of these new players as a means to absorb the forthcoming wave of corporate pension deals. Royal London, a mutually owned life insurer, recently announced its entry into the market.
