Stay informed with free updates
Simply log in to Pension industry myFT Digest – delivered straight to your inbox.
Brookfield has applied to set up an insurance company in the UK, which would allow one of the world’s biggest private equity groups to cash in on a wave of British companies unwinding their pension plans.
Higher interest rates have radically improved the health of corporate pension plans and paved the way for companies to transfer the liabilities and assets of these plans to insurance companies.
According to consultancy LCP, around £40bn of such deals are expected this year, just ahead of the 2023 record.
Toronto-based insurer Brookfield has filed paperwork with the Bank of England’s Prudential Regulation Authority to set up a new insurer, according to people familiar with the matter.
The Canadian group has been considering entering the UK corporate pensions market, which is responsible for the retirement savings of millions of Britons, by buying an established provider.
Brookfield, Apollo and others considered last year a bid for the Pension Insurance Company, one provider that underwrites corporate pension plans through so-called bulk annuity deals, but buyers were scared off by the valuation its owners were seeking, according to people familiar with the matter. .
Starting an insurance business from scratch is likely to be a more challenging way to break into a market dominated by large group annuity providers such as FTSE 100 insurers Phoenix Group and Legal & General.
The application process could take six months if all goes smoothly, but longer if regulators have questions about the investment approach Brookfield would take to manage any pension schemes it chooses.
Brookfield and the Bank of England declined to comment.
The push by private equity groups such as Brookfield into the UK corporate pensions market is part of a wider expansion by these groups into the global life insurance sector. Founded in 2020 and headquartered in Bermuda, Brookfield’s independently managed balance sheet insurance operation now has more than $100 billion in assets under management.
Sachin Shah, the chief executive of the company, known as Brookfield Reinsurance, signaled his ambition to enter the UK market in May, saying that “by the end of the year we should be in a position where we are actually offering transactions” and that it would “start small and eventually moved into larger transactions”.
In its US business, it has done approximately $3 billion in transactions over the past year.
Brookfield also owns a majority stake in Oaktree Capital Management, which backs Utmost, a UK life insurer that also plans to enter the market, according to a person familiar with the matter. He flatly refused to comment.
Taking over responsibility for retiree pension funds is likely to bring close scrutiny for Brookfield, although the UK market has already established private businesses, including PIC and Rothesay.
Private equity groups say they can use their expertise in alternative investments, including the fast-growing private credit industry, to find higher-yielding but suitable assets for pension plans.
In recent months, regulators have increasingly assessed the risks of investment strategies that deviate significantly from the conventional holdings of life insurers, which include government bonds and high-quality corporate debt.
Pension advisers saw the arrival of new players as one way to absorb the expected wave of corporate pension deals. Royal London, a mutual life insurance company, recently announced that it will enter the market.