Legal & General’s latest PRT Monitor has revealed a remarkable surge in global Pension Risk Transfer (PRT) market activity throughout 2023, with transactions totaling over £85 billion in the UK and US combined.
This marks a record-breaking year for the UK market and the second-largest year on record for the US.
In the UK, approximately £50 billion of pension liabilities were secured with insurers, showcasing a significant uptick in activity.
This surge was characterised by a series of groundbreaking transactions, including the British Steel Pension Scheme, which became the largest in the UK to fully insure its members’ benefits. Notable transactions also included those with the Boots Pension Scheme and pension schemes of the RSA Group.
The UK market is projected to see annual volumes ranging between £50-60 billion, a substantial increase from the previous five-year average of £31 billion.
Meanwhile, the US market witnessed an estimated $45 billion in PRT activity in 2023, indicating robust growth and demonstrating the sustained appetite among plan sponsors for risk mitigation strategies.
The fourth quarter of 2023 alone saw volumes exceeding $12 billion, a significant rise from the previous year. Looking ahead, the US market is poised for a potentially record-breaking first quarter of 2024, with an estimated $15 billion in transactions expected.
Industry experts attribute this surge in PRT market activity to improved pension scheme funding levels, prompting innovation in de-risking strategies for pension trustees and sponsors.
Both the UK and US markets are witnessing increased demand, with processes adapting to accommodate this trend. Legal & General, a key player in the market, highlights the importance of leveraging expertise across their organisation to assist schemes in securing and protecting members’ retirement benefits.
George Palms, President of Legal & General Retirement America, emphasises that as interest rates remain elevated, funding levels will continue to be a driving force behind market growth.
This optimistic outlook suggests a prolonged period of healthy markets for years to come, with ample opportunities for plan sponsors to offload risk opportunistically.
