Brookfield, one of the large Canadian private capital firms, is eyeing a start-up in the insurance company business within the UK and trying to capitalize on the increasing pension insurance market. Rising interest rates improved strained pension plans, boosting insurance that covers those plans. Brookfield’s foray is upping the ante in an increasingly crowded market that may alter the very character of the competition.

Brookfield, a major private capital firm based in Canada, is planning to create an insurer in the UK. Consequent to this growing pension insurance market, its objective is to gain a good competitive position. This increase in interest rate has resulted in the significant firming up of corporate pension plans; hence, demand for bulk annuities, which are products insurance companies offer to secure pension schemes, has increased.

Brookfield’s insurance arm, Brookfield Reinsurance, has submitted an application to the Bank of England’s Prudential Regulation Authority for the establishment of a new insurer. Although registration is expected within six months, it could take longer if regulators have misgivings about Brookfield’s plans for investing. Brookfield and the Bank of England have declined to comment on the application.

Last year, Brookfield started eyeing its entry into the booming UK bulk annuities. It even considered bidding for Pension Insurance Corporation. Her CEO at Brookfield Reinsurance, Sachin Shah, said in May that the company is planning to start “bidding on transactions” in the UK by the end of the year. Brookfield Reinsurance in Bermuda was formed in 2020 and oversees more than $100 billion in assets.

Experts estimate that the UK bulk annuity market will reach record levels this year, with transactions worth around £40 billion forecast to take place in 2024. That follows record levels of dealmaking last year. The market for UK bulk annuities is currently dominated by large firms like Phoenix Group and Legal & General; however, Brookfield´" entry would make competition more aggressive.

In March, mutual life insurer Royal London said it would also start offering bulk annuities. Private capital firms such as Brookfield believe their expertise in alternative investments could help find better-yielding assets for a pension plan to retain. That extra return could eventually give better value while ensuring the security of the pension funds.

Brookfield already holds the majority shareholding in Oaktree Capital Management, which is already a backer of Utmost, a UK rival insurer. It, too, is reported to have ambitions for the bulk annuities market. Utmost would not comment but reports in March said it was seeking to hire staff to build a bulk annuities division.

In the final analysis, Brookfield’s decision to create a UK insurer comes at a time when interest in pension insurance is rising, along with competition. As interest rates remain on an upward trajectory, demand for bulk annuities is likely to surge, creating more opportunities for firms such as Brookfield to offer unique and competitive insurance solutions. That will certainly reshape how pension insurance works in the UK by ushering more options for corporate pension plans and probably enhancing returns.