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Update: U.S. pension risk transfer market insights – September

Update: U.S. pension risk transfer market insights – September

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Download this U.S. pension risk transfer market update as a printable PDF.

Market snapshot for Q2 2020
The LIMRA Secure Retirement Institute recently released the following statistics about the pension risk transfer (PRT) market for the quarter ending June 30, 2020:

  • 72 group annuity buy-out contracts were transacted worth $2.3 billion in premium
  • 0 group annuity buy-in contracts
  • 17 insurers participated in the quarterly survey (representing all insurers in the PRT market as of June 30)

The Secure Retirement Institute reported that buy-out sales totaled $6.7 billion during the first 6 months of 2020. From LIMRA Fact Tank data, we estimate:

  • $25.8 billion in buy-out premiums for the 12-month period ending June 30, 2020
  • $160 billion in buy-out premiums since 2012
  • $3 billion in buy-in premiums since 2014

Market outlook for the remainder of 2020

Transaction calendar is filling up fast

This may mean that PRT insurers will be more selective in their bidding strategy and the average number of insurers bidding on a given case will decrease through year-end.

PRT volume expected to drop

Overall transaction volume for 2020 is expected to be lower than 2018 and 2019, even with the end-of-year spike in buy-outs.

 

Insurer capacity

The PRT market averaged just under $26 billion per year in buy-out premiums during 2017-2019. At this pace, there should be sufficient insurer capacity for PRT transactions in the near term.

New insurers entering the market

There are now 18 insurers writing group annuity contracts for pension plans, up from 16 at the start of the year. The latest entrants are Nationwide and Midland National Life.

 

For more information on PRT or pension risk management contact Tom Sablak at 617 448 5582 or Thomas.Sablak@buck.com, or your local Buck consultant.

Buck Global, LLC (Buck) is an investment advisor registered with the SEC. Our investor advisor disclosure document 
can be found on the SEC website: http://www.adviserinfo.sec.gov/IAPD/Content/Search/iapd_Search.aspx. Registration 
with the SEC does not imply a certain level of skill or training. Indicative rates only are provided in this document. 
Annuity premiums and equivalent annuity purchase interest rates change daily and are driven by many market forces that 
fall outside of the control of Buck; therefore, Buck cannot guarantee that actual or future annuity purchase interest 
rates will fall within the ranges shown in this document. Data presented in this document reflects the proprietary 
analysis of Buck, combined with data from third parties. Buck believes that the data collected from third parties is 
accurate, but Buck has not audited this data. Buck assumes no liability or responsibility for reliance on the data 
presented in this document. In our annuity rate barometer, group annuity premiums are estimated using our proprietary 
annuity pricing yield curve (published weekly), while accounting liabilities reflect the Buck regular and above median 
yield curves. Our barometer assumes group annuity contracts are priced competitively. To simplify the analysis, our 
barometer assumes that insurance companies price the group annuities using a mortality assumption that is similar to 
that used for the accounting liability calculation. The actual ratio of the group annuity premium to the accounting 
liability for a given plan will depend on many factors, including demographics, accounting valuation assumptions, 
timing, and other market forces. Each pension plan, sponsor, and annuity purchase transaction is different, and care 
should be taken when applying indicative rates and survey information to any given transaction. Please contact us if 
you would like to discuss items specific to your pension plan.

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