Legal & General Retirement America (LGRA) has unveiled insights into the US Pension Risk Transfer (PRT) market for the third quarter of 2023.
Following a record-breaking first half with a deal volume of $22.5 billion, the Q3 edition of the US Pension Risk Transfer Monitor indicates an anticipated market volume of $10 billion, the report noted.
Sheena McEwen, VP and Head of Distribution at Legal & General Retirement America, highlighted the diversity in deal types and sizes within the PRT market. Despite a slight dip compared to the previous year’s third quarter, the market is still on a trajectory of rapid growth.
The total market volume is projected to reach approximately $45 billion by the end of 2023, marking the second-largest year to date after 2022’s total of $51.9 billion.
The report emphasises the ongoing expansion of the PRT industry in the US, with plan sponsors actively seeking solutions to offload pension risks.
The Pension Benefit Guaranty Corporation participant rate, a cost borne by plan sponsors, is expected to rise to $101 per participant for 2024, potentially incentivising sponsors to explore pension risk transfer options, including plan terminations and lift-outs.
Two significant jumbo deals in Q3 contributed to the estimated $10 billion market volume, building on the momentum created by four earlier deals in the year.
While Q3 figures have steadily increased year over year, the previous year’s exceptional performance was influenced by a $16 billion jumbo deal with IBM.
Despite not surpassing the 2022 record, the overall positive trend in PRT transactions and jumbo deals suggests a promising future for the market. LGRA estimates the total market volume for 2023 at around $45 billion.
The report concludes by speculating that the PRT market’s momentum could continue into 2024, especially if pending jumbo deals materialise in the first quarter, setting the stage for another robust year.
