2022 was another banner year in the U.S. Pension Risk Transfer (PRT) market as more plan sponsors implemented de-risking activities for their pension plans
What was the impact of Pension Risk Transfer Market Activity?
According to Aon’s U.S. Pension Risk Transfer (PRT) report, there has been a 28% increase in the U.S. pension risk transfer market, with 568 transactions last year versus 444 in 2021. These transactions totaled $52 billion in premium in 2022, which was the highest Aon has recorded in a decade.
How large are the transactions?
IBM headlined this activity completing a $16 billion retiree lift-out in September of 2022, the second largest PRT transaction in U.S. history. Plan sponsors of all sizes continue to favor pension risk settlements as they look for ways to reduce balance sheet liabilities and income statement volatility. In response to market growth, the universe of PRT insurers continues to expand, adding three new names in 2022 to bring the current count to 21 insurers. This increase in insurer participation in the PRT space ensures there is ample human and economic capital to support both current PRT demand and future growth.
What does the paper provide insights on?
- 2022 PRT Premium and Transaction Volume
- Insurer Dynamics
- Insurer Pricing Experience
- Fiduciary Considerations and Potential Changes
- PRT in 2023 and Beyond
What has been the impact of rising interest rates?
Rising interest rates served as a catalyst for increased PRT activity in 2022 despite periods of volatility creating temporary challenges. There were 568 PRT transactions totaling $51.8 billion in premium in 2022. These were both record highs for the U.S. PRT market. What makes the total premium more impressive is that the significant increase in interest rates reduced the size of plan liabilities, effectively making the premium for individual PRT deals smaller. The chart below shows the year over year growth