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Brookfield has filed to set up an insurance business in the United Kingdom, a move that will allow one of the world’s largest private equity groups to benefit from a wave of British companies shedding their pension plans.
Higher interest rates have dramatically improved the health of corporate pension funds and allowed companies to transfer the funds’ liabilities and assets to insurers.
According to consultancy LCP, around £40bn of such deals are expected this year, slightly less than the record set in 2023.
Brookfield’s Toronto-based insurance arm has filed documents with the Bank of England’s Prudential Regulation Authority to set up a new insurer, according to sources familiar with the matter.
The Canadian group had considered entering the UK company pensions market, which provides retirement savings for millions of Britons, by buying an established provider.
Brookfield, Apollo and others considered a bid last year for Pension Insurance Corporation, a provider that takes over the company’s pension plans in so-called bulk annuity deals. But buyers were reluctant because of the valuation their owners were demanding, people familiar with the matter said.
Setting up an insurance business from scratch is likely to be more challenging to gain a foothold in a market dominated by large annuity providers such as FTSE 100 insurers Phoenix Group and Legal & General.
If all goes well, the application process could take six months, but it could take longer if regulators have questions about Brookfield’s investment approach to managing pension plans it acquires.
Brookfield and the Bank of England declined to comment.
The push by private capital groups such as Brookfield into the UK corporate pensions market is part of a broader expansion by such groups into the global life insurance sector. Brookfield’s insurance business, a separately managed, standalone balance sheet business based in Bermuda, was established in 2020 and now has more than $100 billion in assets under management.
Sachin Shah, CEO of the firm known as Brookfield Reinsurance, signaled in May that he had ambitions to enter the UK market. He said the firm “should be in a position by the end of the year where we can actually bid on transactions” and that it would “start small and eventually move to the larger transactions”.
In the United States, the company processed $3 billion in transactions last year.
Brookfield also owns a majority stake in Oaktree Capital Management, which backs Utmost, a British life insurer that also plans to enter the market, a person familiar with the matter said. Utmost declined to comment.
Taking on responsibility for retirees’ pension funds is likely to put Brookfield under fire, although private firms have already been set up in the UK market, including PIC and Rothesay.
Private equity groups say they can use their expertise in alternative investments, including the fast-growing private credit sector, to find higher-yielding, yet suitable assets for pension funds.
In recent months, regulators have increasingly looked at the risks of investment strategies that deviate significantly from life insurers’ conventional investments, such as government bonds and high-quality corporate debt.
Pension consultants see the arrival of new players as a way to capture the expected wave of corporate pension deals. Royal London, a mutually owned life insurer, recently announced it would enter the market.