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L&G expects pension risk transfer activity to continue apace

10th August 2020 - Author: Katie Baker

Legal & General Retirement Institutional has announced that despite COVID-19, 2020 is expected to be the second largest year on record for the pension risk transfer (PRT) market.

Longevity imageUK PRT is expected to transact £20bn to £25bn, which demonstrates the resilience of this marketplace.

Since L&G’s market entry in 2015, their US business has written more than $3.9bn of PRT with 56 clients, which includes four transactions being made in H1, 2020.

The success of L&G’s half year results could be down to them being the only insurer who provides PRT directly to pension plans globally. In May, during the height of the UK lockdown, they undertook the first international PRT transaction for IHS Markit. This transaction secured benefits for both their UK and US pension plans.

This is anticipated to be “one of the key levers that sponsors with UK and US obligations look to utilise going forwards”.

The demand has been global for PRT and L&G has shown that it’s remained resilient through the COVID-19 pandemic. The firm’s ability to deal flow has continued without hinder throughout the lockdown.

In H1 2020, L&G wrote 53% more transactions by count than they did in H1 2019 (H1 2020: 29; H1 2019: 19).

This trend is true in both the UK, where they wrote 10 more transactions (H1 2020: 25; H1 2019: 15), and in the US (H1 2020: 4; H1 2019: 3).

76% of the UK’s transactions were with Legal & General Investment Management (LGIM) clients, demonstrating the resilience provided by their position as the only firm operating across the full pension de-risking journey.

L&G’s intention remains to write £40bn to £50bn of new UK PRT business over the next five years.

In H1 2020, they secured £3.176bn of new UK PRT business (H1 2019: £6,316m) and £248m of international PRT (H1 2019: £361m).

Laura Mason, CEO, Legal & General Retirement Institutional, said: “The past six months have demonstrated the continued appetite for PRT across the UK and US market, particularly from smaller schemes taking advantage of our innovative solutions and the favourable pricing conditions.

“Despite all working remotely since the beginning of lockdown, the team has still been able to transact deals and deliver the same high-quality service that our customers have come to expect from Legal & General. I am extremely proud of what they have been able to achieve so far this year.

“While this first half has seen fewer of the ‘mega deals’ of 2019, predictions still point to 2020 being a highly successful year for the PRT market. We look forward to continuing to offer de-risking solutions, for schemes of all sizes, with new and existing clients in the UK, USA and globally.”

This comes after L&G announced a partnership with the 3i Group Pension Plan, completing a £650 million buy-in with the Trustees of the Plan.

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