Pension Risk Transfers Boom: Report

Pension risk transfers – the process of a DB plan provider offloading some or all of a plan’s liabilities – have exploded since 2007 to the tune of $260 billion, according to a report by Prudential.

As you can see in the above graphic, the transfers are most popular in the U.K. by a significant margin; but the industry is booming in the U.S., too.

More details from ai-cio.com:

More than $260 billion in pension liabilities have been transferred since 2007, according to a report by Prudential.

At least 40 pension funds in the UK, US, and Canada executed de-risking transactions of over $1 billion in the last eight and a half years, the study found.

Pension risk transfer (PRT) has been most widely adopted in the UK, with nearly $180 billion in de-risking transactions occurring there between 2007 and June 2015. According to the report, momentum in PRT has been driven by “competitive pressure in every industry peer group.”

“Plan sponsors and fiduciaries who proactively manage or transfer pension risk can fund their pension obligations with certainty and gain a considerable advantage over those who don’t,” said William McCloskey, vice president of longevity reinsurance within Prudential Retirement’s PRT business.

The trend was found to be less popular in North America. Canadian plans have transferred just $16 billion in liabilities since 2007, while the US transferred $67 billion—a number heavily boosted by “landmark” General Motors and Verizon PRT deals in 2012.

View the full report here.