Part VII transfers on the rise amidst UK financial services M&A uptick

Regulatory change, market developments, and the geopolitical and economic environment all had a bearing on what was a subdued corporate market in 2022 and 2023. However, 2024’s M&A figures point to a more buoyant market for deals with an increase in Part VII transfers as a result.

Below, ahead of our annual event on Part VII transfers on 2 April 2025, which Pinsent Masons co-hosts with actuarial firm Milliman, we explore some of the data and factors behind the trends we’re seeing.

Financial services M&A

Analysis by Pinsent Masons has found that M&A deal completion across UK financial services increased significantly in 2024. In total, there were 326 deals completed last year – the highest number recorded in a single year since 2008. The insurance sector saw the most activity, increasing by two-thirds compared to 2023, with 122 deals completed. Banking, and asset and wealth management, also saw a rise in deal volume, with 38 (up from 29) and 106 (up from 75) deals completed respectively. Deal activity rose year-on-year across the sub-sectors of banking, insurance and asset management.

Looking forward, recent news that London-based Cinven has, subject to regulatory clearance, sold German life insurer Viridium to a consortium including Allianz and BlackRock provides fresh evidence of the appetite for deal-making in the insurance sector.

Factors driving deal-making and the effect on volume Part VII transfers

The increase is part of a global cross-sector rebound in M&A after a moribund 2023 caused interest rate rises and economic uncertainty. While uncertainty still no doubt persists, the conclusion of elections in the UK and overseas in 2024 and more stable economic indicators meant companies could plan and invest with more confidence.

In the UK financial services sector specifically, a few other factors have been at play.

The final deadline for the implementation of the consumer duty in July 2024 marked the end of a period of several years where firms had to ensure all existing and closed products were compliant with the new rules. With the passing of the deadline, acquirers can have increased confidence that portfolios have undergone extensive review in line with the duty and that they will not have to bear the full responsibility for making products compliant.

The growth in pension risk transfers in the UK also has the potential to drive further deal-making in the UK insurance market. With pension risk transfers, the risks of operating pension schemes are commonly transferred to insurers, which will either continue to operate the scheme itself or take on responsibility for winding up the scheme. The recent entry into the UK pensions risk transfer market of Brookfield Wealth Solutions, a US asset manager, is evidence of the growing overseas interest in the market.

The growth of private capital, driven by global regulations like Basel 3.1 in the wake of the global financial crisis, has also led to an increased flow of money in the sector and a wider array of buyers. The consolidation that we have been seeing in the insurance and asset and wealth management sectors over the last few years has been increasingly driven by private equity interest, while, in the US, private credit shops have been buying up life insurance companies to use as their lending base. Similar dynamics have seen banks repositioning their balance sheets and streamlining some of their lending and insurance activity.

What are Part VII transfers?

In the UK, insurers wishing to transfer insurance business between one another need to complete a so-called Part VII transfer. This is a statutory process, provided for in Part VII of the Financial Services and Markets Act 2000 (FSMA), that enables the transfer of portfolios of insurance business from one entity to another, subject to court approval. If used correctly, it is a nimble and effective process businesses can use for their commercial and operational benefit.

The process involves the drafting of a transfer scheme – a document setting out the terms upon which policies, assets and liabilities will transfer from insurer A to insurer B. The parties will apply to the court for an order approving the transfer and must instruct an independent actuary to provide an independent report to the court within which they will advise of any material adverse impacts likely to materialise as a result of the proposed transfer. The process requires the insurers to engage with policyholders to advise them of their intentions, with policyholders having an opportunity to object.

Because insurance business transfers raise potential financial stability and consumer harm risks, both the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) have roles to play in the process.

In the run-up to the UK leaving the EU, Part VII transfers were plentiful. This was because insurers came under regulatory pressure to prepare for the possibility of ‘hard Brexit’. This triggered a rush from insurance groups to transfer European insurance business written by UK insurers to insurers based in the EU to account for the risk that regulatory permissions and passporting rights enabling UK insurers to continue serving EU customers would be withdrawn overnight. Dublin, Luxembourg and Frankfurt were among the beneficiaries of this factory of insurance business transfers.

Post-Brexit, the volume of Part VII transfers fell, with the dampening of appetite for corporate transactions in financial services during the Covid-19 pandemic and the general economic uncertainty since having an impact in this regard. We understand there were just four Part VII transfers in 2024 across the whole market.

The Part VII transfer process is long – it can take 12-18 months to complete – and so tracks behind M&A activity. With the increase in deal-making in 2024, and a confluence of factors expected to encourage that trend to continue, we expect the number of Part VII transfers to increase during the course of 2025 and well into 2026.