In the current buy-in market, we often get asked by smaller schemes whether they will be shut out from accessing competitive pricing from multiple insurers.  The short answer is – as my colleague Charlie articulated in his excellent post here – absolutely not!   

Our consistent experience is that for schemes of all sizes it is entirely realistic to obtain prices from multiple insurers. This is not to say that exclusive processes with one insurer are not appropriate in some situations, but schemes of all sizes should recognise they have a choice in the approach they wish to take.

In this blog I have focussed on what tangible actions those managing smaller schemes can take to access competitive insurer pricing.

The value of competitive pricing

We see a wide range of pricing between different insurers for any given process, often more than 5% between the highest and lowest prices. The savings from the right competitive process – i.e. one with multiple engaged insurers quoting – can be significant and even for very small cases can be hundreds of thousands of pounds.  Trying to cut corners with the process will often be a false economy as the savings from approaching the market in an optimal way with multiple insurers far outweighs the additional costs involved.  

What do we mean by “small”?

The generally held view on what constitutes a small scheme has shifted significantly since I started my career when anything under c.£50m fell into this bracket. In the current market – with so many schemes increasingly well-funded and looking to obtain insurer pricing - anything under c.£100m and possibly as high as £200m could be considered small (with the view varying across insurers).

The bedrock of any approach to insurers

Schemes should do everything in their control to make themselves an attractive opportunity for insurers. Robust preparation is therefore key, and fundamental to any case we take to market at LCP  

Secondly, use an approach to engage multiple insurers that is proven to work!  Our market-leading LCP streamlined service for smaller schemes, instils a high degree of confidence with insurers in a scheme’s ability to transact efficiently. This has become almost compulsory for transactions under £100m if you want multiple insurers to quote.

What, there’s more?

In addition to the well-beaten drum of robust preparation and streamlining your process, what else can (and should) smaller schemes be doing to obtain competitive insurer pricing?

• Engage early and be flexible

We regularly engage with all insurers in this market to understand how each of our cases fits into their wider pipeline. We look to be flexible where appropriate with our processes to align them with insurer constraints to maximise the number of insurers who participate.

• Leverage your risk transfer adviser’s reputation

Insurers are more likely to allocate their finite resource to cases which have a high degree of transaction certainty. Advisers with a proven track record of completing transactions will therefore clearly be favoured. Our record of completed transactions – e.g. 100% of our streamlined service transactions have successfully completed this year – is something we look to leverage for all our clients.

• Be focussed on your key asks

Insurers have finite resource, and they will engage on cases which have clear requirements.  Your de-risking adviser should guide you through what are reasonable asks for insurers, how to position them effectively and identify requests which may deter insurers from quoting. Asking for the “moon on a stick” will be given short shrift in the current market.

• Do not feel you need to rush to market

Amongst a rush of schemes approaching insurers, there may be a temptation to rush to market. However, this is likely to be detrimental to your chances of securing the best outcome for your scheme.  

By taking your time and preparing robustly, including engaging with insurers, de-risking your investment strategy, and optimising the timing of your approach, you will achieve a much better result.

Whilst there is always the risk of pricing worsening in the future e.g. as demand ramps up, there are currently reasons to be optimistic with several new entrants lining up to enter the market, in addition to M&G which re-entered in September

Closing thoughts

At LCP, we pride ourselves on using our market insight and strong reputation with the insurers to help each of our clients secure the best outcome for their scheme’s members by navigating an increasingly challenging market. For those looking to approach insurers, if you take one thing away from this blog I’d like it to be that – with the right adviser – you can still engage multiple insurers to deliver competitive pricing for smaller schemes in the current market, helping to secure the best outcome for your scheme and its members.