Brookfield, a global leader in private capital, has initiated plans to establish an insurance company in the UK. This strategic move aims to tap into the burgeoning trend of British firms transferring their pension obligations amidst favorable economic conditions, bolstered by higher interest rates.
The Toronto-based conglomerate’s insurance arm has formally applied to the Bank of England’s Prudential Regulation Authority for regulatory approval. Sources familiar with the matter disclosed that Brookfield initially contemplated entering the UK corporate pensions sector by acquiring an existing provider. Notably, Brookfield, along with Apollo and other entities, previously explored bidding for Pension Insurance Corporation last year, although negotiations faltered over valuation disagreements.
Creating a new insurance entity from scratch represents a formidable entry strategy into a market predominantly dominated by established bulk annuity providers like Phoenix Group and Legal & General. Regulatory procedures for Brookfield’s application typically span six months, potentially longer if regulatory scrutiny intensifies concerning the investment strategies underpinning its pension management approach.
Brookfield declined to comment on the specifics of its application, underscoring the confidentiality of ongoing regulatory processes. The move by private capital firms such as Brookfield underscores a broader trend of expanding into the global life insurance sector. Brookfield’s insurance operations, managed independently with assets exceeding $100 billion, were founded in Bermuda in 2020, positioning the firm to pursue opportunities in the UK market.
Sachin Shah, CEO of Brookfield’s insurance business, Brookfield Reinsurance, expressed confidence in the firm’s ability to compete in the UK market, anticipating participation in transactions by year-end. He emphasized a phased approach, beginning with smaller deals and gradually scaling up to larger transactions, mirroring the firm’s successful strategies in the US market.
In parallel, Brookfield holds a majority stake in Oaktree Capital Management, which supports Utmost, a UK-based life insurer also eyeing entry into the market. The influx of new players into the UK’s corporate pensions sphere, traditionally led by entities like PIC and Rothesay, has drawn attention from regulatory bodies scrutinizing the investment practices of insurers.
Despite potential regulatory scrutiny, private capital groups advocate leveraging their expertise in alternative investments to optimize pension fund returns. This approach contrasts with conventional holdings such as government bonds and high-quality corporate debt favored by traditional life insurers. Industry observers anticipate these developments will facilitate the absorption of the anticipated surge in corporate pension deals.
Royal London, a mutually owned life insurer, recently announced its own plans to enter the market, underscoring growing competition within the sector. As Brookfield navigates the regulatory approval process, its foray into the UK insurance market reflects a calculated strategy to capitalize on evolving economic conditions and investment opportunities within the pensions landscape.
