An enhanced annuity allows people in ill health to receive a higher regular income in recog­nition of the fact that they, on average, have a shorter life expec­tancy than a healthy person. Since the mid-90s, we have positioned ourselves as a major reinsurer of enhanced annuities. Our detailed understanding of prevailing sales and distribution processes in the UK market allows us to provide solutions tailor-made to our clients’ needs.

The UK market

Until 1995, the UK annuity market was essen­tially static, offering only conven­tional annuity rates. The situ­ation changed with the intro­duction of enhan­ced annui­ties. Today, the providers offer fully underwritten annuities ranging from healthy to severely impaired. Until April 2015 it was more or less compulsory to purchase an annuity before age 75. Since then pensioners have complete freedom to draw down their pension pot, keep it invested or buy an annuity.

Since 1995, Hannover Re has part­nered with a number of provi­ders to support product develop­ment and en­courage market growth. The en­hanced annuity market is sophisticated and the providers use a common medical questionnaire, the retirement health form.

Nowa­days, there are a number of portals that allow inde­pendent finan­cial advi­sers to access infor­mation on pro­ducts and pro­viders, request compa­rative quotes, and trans­act new busi­ness inclu­ding online medical under­writing. Custo­mers obtain imme­diate guaran­teed quotes from a couple of provi­ders by simply answe­ring a limited number of questions. Most cases are assessed automatically and only a few remaining cases with rare diseases need manual underwriting and a general practitioner’s report is required.

Our solution

Hannover Re has more than 20 years of experi­ence and exper­tise in the en­hanced annuity market. We have access to a large data­base of im­paired lives which we analyse on a regular basis to update our morta­lity assump­tions. Our state-of-the-art auto­mated under­writing system allows for imme­diate guaran­teed quotes and enables Hannover Re and its clients to write en­hanced and im­paired annuity business on a profi­table basis.

Worldwide developments

Since life expectancy has increased globally over the last years there is a worldwide need for longevity products such as annuities. With our expertise built in the UK we now focus on worldwide developments. Enhanced annuities are not only sold in the UK but also in South Africa and we are evaluating the opportunities for enhanced annuities in Australia where currently regulatory changes offer great chances for enhanced annuities. Solutions for other markets are flexible annuity concepts, such as a combination of drawdown and a deferred guaranteed lifelong annuity. Here, the clients can flexibly withdraw their money say from age 65 to 85, and from age 85 a lifelong annuity will be paid.

Although enhanced annuities volumes decreased after pension freedom, Hannover Re con­siders the en­hanced annuity market to remain an attrac­tive segment and is eager to take up the challen­ges the new regu­lation brings.