The Legal & General Group’s global Pension Risk Transfer (PRT) businesses – Legal & General Retirement Institutional (LGRI), the UK’s longest-serving active pension risk transfer provider and Legal & General Retirement America (LGRA), a leading provider of pension risk solutions in the US – today released the latest edition of the Global PRT Monitor, which analyses industry trends and market outlooks in the UK and US.
The Monitor reports a strong second half of 2021 for both markets, resulting in a potentially record-breaking year for the US with an estimated $38-40 billion (£28-30 billion) in total annual transaction volume. This far surpasses the $27 billion reached in 2020. Last year’s volume was spurred on by an increased number of large-to jumbo transactions and the improved funding status of Defined Benefit pension plans due to strong investment returns and rising interest rates.
In the UK, the Monitor reports that the second half of the year was one of the largest and busiest six-month periods in the history of the market, with around £22 billion of retirement income secured. Overall, it estimates the total transaction volume for the year approached £30 billion. The growing demand was driven by a number of factors, including improved pension scheme funding levels and competitive longevity reinsurance pricing.
The Monitor anticipates that volumes will continue to grow in the UK. This growth will be driven by various factors such as market movements, asset availability and the number of large pension plans coming to market. The mega-transactions of >£1 billion in 2019 demonstrated that the market has sufficient capacity for higher volumes and numerous multi-billion-pound transactions.
In the US, appetite for plan sponsors with de-risking ambitions is expected to increase in 2022, with a number of transactions over $750 million already in the pipeline.
LGRI Institutional Insights podcast features ‘Looking at PRT market trends in 2022’ with John Towner (Head of UK New Business, LGRI) and Sheena McEwen (Head of Distribution, LGRA) – Listen to the podcast episode here and on Spotify here.
Chris DeMarco, Managing Director UK PRT, Legal & General Retirement Institutional
“Last year was another busy year for the UK PRT market, and we expect activity to accelerate in the years ahead. We believe the market will go from strength to strength as more schemes move closer to their endgame and full buyout, with new innovations bringing increased flexibility and affordability. The experience of the past two years has underlined the fundamental purpose of insurance: protecting the retirement income of members during one of the most uncertain periods in living memory”
George Palms, President, Legal & General Retirement America
“Last year’s potential record transaction volume in the US was driven by large deals. The story in 2022 will be the acceleration of deal volume of all sizes, as plan sponsors take advantage of an increase in funding status and rising interest rates. A robust pipeline in the first quarter provides early evidence of this strong demand. We also anticipate an upswing in plan-terminations – the final step in the de-risking journey. Plan sponsors contemplating a risk transfer should consider the unique opportunity the next year presents, as financial market conditions and competitive market dynamics remain favorable.”