Pension Risk Transfers Poised for 2nd Strongest Year Ever

It has been another big year for pension risk transfers, with 2023 shaping up to be the second most active on record, topped only by 2022’s showing, according to a report from Legal & General Retirement America, a PRT provider.

The market volume for PRT deals this year is projected to be $45 billion, LGRA noted. That will be shy of 2022’s $52 billion tally, which was fueled by the second largest transfer in history: International Business Machines Corp.’s September shifting of $16 billion of pension obligations to subsidiaries of Prudential Financial Inc. and MetLife Inc. (The largest was General Motors Co.’s 2012 transfer of $25.1 billion to Pru.)

This year’s first half (volume: $22 billion) was plumped up thanks to several jumbo deals, including the $8.1 billion PRT in May involving AT&T Inc. and two subsidiaries of Athene Holdings. The Q3 tally came in at $10 billion, the LGRA report stated, and “we continue to see steady momentum of PRT transactions and jumbo deals.”

Furthermore, LGRA contended, the future looks good for PRTs. “Should the few jumbo deals we are seeing in the pipeline close in Q1 2024, it could result in an unparalleled first quarter,” the report opined.

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One factor driving PRT deals lately is higher interest rates, which reduce the size of plan liabilities, making transfers more appealing to the insurers who receive the plans, an Aon analysis concluded.

Steadily escalating premiums from the Pension Benefit Guaranty Corporation are also helping propel plan sponsors to offload their pension obligations, LGRA asserted. The premiums are slated to leap more than 5% next year, following a 9% hike this year.