The US pension risk transfer (PRT) market had its largest quarter in Q1 2022 with an estimated volume of $5.5bn, according to the latest Pension Risk Transfer Monitor from Legal & General.
The insurer said that the first three months of 2020 and 2021 saw volumes of $4.5bn and $3.8bn. This, said L&G, demonstrated the ‘resiliency of the PRT market despite an unpredictable economy’.
George Palms, president of L&G Retirement America, said in a statement: “The PRT market is experiencing breakaway growth amid a turbulent economy, providing further evidence of the value and resilience of this risk management solution. At a time when the markets remain volatile and economic conditions continue to change, PRT transactions can be an effective option to mitigate plan sponsors’ risk and improve benefit security for plan members.”
The numbers are such that L&G posit that 2022 may see the strongest first half of the year to date, saying that volumes could exceed $20bn.
L&G wrote: “We saw several large transactions come to market in 2021, as mentioned in our last PRT monitor, which helped drive the record year. This trend has continued into 2022 with the closing of two large deals of over $1bn in Q1, contributing to the high market volume we saw.”
The Pension Risk Transfer Monitor found that plan termination activity dominated the market in Q1, representing 60% of deals transacted by premium. The remainder were lift-outs.
Termination plans could go continue into 2023, said L&G, citing that funding levels for DB pension schemes had increased from 93.5% to 96.3% over the first quarter.
It added: “With increased funding levels and a large number of insurers actively participating in a highly competitive market, plan sponsors may begin considering mitigation strategies and see this as an appropriate time to terminate their plans, which means we could see plan termination activity continue well into 2023.”