New data from Legal and General shows that the US pension risk transfer (PRT) market had a record year in 2022 with an estimated $53 billion in total market volume, significantly exceeding the 2021 record of $38 billion.
This is according to the latest Global PRT Monitor from L&G businesses, Legal & General Retirement America (LGRA) and Legal & General Retirement Institutional (LGRI), which analyses industry trends and market outlooks in the UK and US.
The Monitor shows that the first three quarters of 2022 were all record-breaking quarters while estimates for Q4 2022 are around $9 billion – a decrease from the $12.8 billion recorded in Q4 2021.
Growth in the US was driven by large transactions, L&G reports, with nine individual transactions near or over the $1 billion mark closing throughout the course of the year.
The improved funded status for pension plans and recent market volatility is also thought to have contributed to the surge in PRT activity.
In the UK, the Monitor reported that more than £25 billion of retirement income was secured with insurers in 2022, with five transactions of over £1 billion having been announced publicly during the year.
L&G observed that improved pension scheme funding levels have accelerated the journey to buyout for many pensions schemes and noted that some market participants have projected demand for buy-ins and buyouts could total £200 billion over the next few years.
“We saw yet another record-breaking year in the US PRT market, signaling the growing strength and resiliency of the market,” said Sheena McEwen, VP Head of Distribution for LGRA.
“As the market has evolved, we’ve seen volumes continue to rise and more transactions being announced publicly – which is helping to broaden knowledge and understanding of PRT as a key risk mitigation strategy for US insurers,” he continued. “Momentum from 2022 has carried over into 2023 and we are anticipating another busy H1 with several transactions over $1 billion already in the pipeline.”
John Towner, Head of UK Pension Risk Transfer at LGRI, also commented: “Increasing numbers of UK pension schemes are looking to insurance to provide security to their members. Our market has continued to deliver for pension schemes in all varieties of environments. We are excited for what we expect will be a busy few years ahead.”
