Pension Risk Transfers Climb to $260B | Chief Investment Officer

More than $260 billion in pension liabilities have been transferred since 2007, according to a report by Prudential.

At least 40 pension funds in the UK, US, and Canada executed de-risking transactions of over $1 billion in the last eight and a half years, the study found.

Pension risk transfer (PRT) has been most widely adopted in the UK, with nearly $180 billion in de-risking transactions occurring there between 2007 and June 2015. According to the report, momentum in PRT has been driven by “competitive pressure in every industry peer group.”

“Plan sponsors and fiduciaries who proactively manage or transfer pension risk can fund their pension obligations with certainty and gain a considerable advantage over those who don’t,” said William McCloskey, vice president of longevity reinsurance within Prudential Retirement’s PRT business.

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The trend was found to be less popular in North America. Canadian plans have transferred just $16 billion in liabilities since 2007, while the US transferred $67 billion—a number heavily boosted by “landmark” General Motors and Verizon PRT deals in 2012.

Additionally, while longevity risk transfers made up a sizeable portion of the UK’s PRT market, all risk transfers in the US and Canada were limited to pension buy-outs and buy-ins until 2014, according to the report.

The first North American pension fund to complete a longevity risk transfer transaction was Bell Canada, which transferred $5 billion of pension liabilities in early 2015.

US pensions have yet to adopt longevity de-risking.

However, as life expectancy continues to increase, Prudential predicted that several countries will begin using longevity risk transfer solutions, including the US.

“We expect to see this trend continue to grow, because this is a sensible, profitable business for life companies to write for all the right economic reasons,” said Amy Kessler, head of longevity risk transfer at Prudential Retirement’s PRT division.

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Jayne Styles, CIO of insurance group Amlin, has joined UK retail investment broker Hargreaves Lansdown as a non-executive director.

Styles has also become chair of the FTSE 100-listed company’s investment committee, effective from October 23. Hargreaves Lansdown is the largest investment broker in the UK, administering more than £55 billion ($84.4 billion) for 727,000 individual clients.

Styles has been CIO at Amlin since 2002, overseeing multi-asset, multi-manager portfolios for the specialist insurer and reinsurer worth more than £4.5 billion. She is also a member of Amlin’s management group, which sets corporate strategy, and was on a panel at CIO Europe’s Influential Investors’ Forum in May.

“Jayne’s highly relevant financial services background brings new skills and expertise to the board,” said Mike Evans, chair of Hargreaves Lansdown. “She is ideally qualified to assume the role of chair of the investment committee.”

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According to Amlin’s interim results statement, the group made £96 million in investment returns in the first six months of 2015. This compared to £118.5 million for the whole of 2014.