Law firm Pinsent Masons has warned of a potential capacity crunch in the bulk annuity market following Goldman Sachs’ decision to sell its majority holding in Rothesay Life.
Earlier this month, the investment bank revealed it plans to sell its stake in the pension buyout firm over the next 12 months. According to reports, US investment firm Blackstone is considering taking a minority stake in Rothesay Life, which is said to be valued at up to £950m.
Pinsent Masons head of pensions Alastair Meeks says Basel III reforms, which will impose bigger capital requirements on banks, are forcing banks to review their interests in insurance companies such as Rothesay Life. He says: “We can expect to reach a point soon when there will be far more pension schemes wanting to buy out than there is capacity in the market to absorb them. Some, perhaps most, of those schemes are going to find their plans thwarted.
“Basel III reforms are having an impact on banks’ interest in the insurers that take on pension liabilities. The banks’ stance is a symptom of a drop in supply by insurers, just when demand is about to take off.”
Blackstone declined to comment on the matter.