Pension Risk Transfer Contracts Hit Record Numbers in 3Q

Pension risk transfers logged a record number of transactions in the year’s third quarter: 207, according to LIMRA, the insurance trade association. Although the quarter’s PRT premium income was far lower than the quarterly dollar record set in Q3 2022, LIMRA thinks it showed smaller plans were getting in on the PRT action.

In dollar terms, the September-ending quarter clocked $10.4 billion in premiums, down 60% from the record set in last year’s third quarter ($26.1 billion), which carried 2022 overall to a record. Nonetheless, the large number of transactions “signals broader interest with midsize and small plans,” said Keith Golembiewski, senior director of strategic initiatives at LIMRA, in a statement.

The year’s first two quarters were marked by several major deals, particularly the $8.1 billion PRT in May involving AT&T Inc. and two subsidiaries of Athene Holdings, while the third quarter did not have such monster transactions. One of its largest deals was the $1 billion in obligations transferred to Prudential Financial from PSEG, an energy provider.

If the burgeoning PRT trend continues on its current path, LIMRA predicted that this year will be the second largest in terms of premium volume, after last year’s blowout performance.

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As PRT provider Legal & General Retirement America analyzed in a statement last month, “the market continues to exhibit rapid growth, and total market volume is estimated to close at around $45 billion at the end of 2023—the second largest year to date following 2022’s total of $51.9 billion.”

Among the forces driving PRT deals lately are higher interest rates, which reduce plan liabilities, thus rendering transfers more appealing to the insurers who receive the plans, an Aon analysis found. Another factor: steadily rising premiums from the Pension Benefit Guaranty Corporation.

The steady demand in recent years for PRT is one of the factors attracting investors to the insurance industry. So far in the second half of 2023 alone, managers of both public and private assets have entered or expanded their exposure to the insurance and reinsurance business.