Record breaking global PRT market activity seen in 2023, totalling over £85 billion in UK and US

• c.£50 billion secured in the UK during the year, following series of landmark transactions
• US market volume reached an estimated $45 billion in 2023
• Annual volumes in the UK projected to increase to £50-60 billion, from an average of £31 billion in the five years prior to 2023

2023 was a record-breaking year for the UK’s Pension Risk Transfer (PRT) market and the second largest year on record in the US, according to Legal & General’s latest PRT Monitor.

The Monitor, which analyses industry trends and market outlooks, showed an estimated £50 billion of pension liabilities were secured with insurers in the UK and $45 billion in the US.

The surge in UK activity was distinguished by a series of landmark transactions including the British Steel Pension Scheme, becoming the largest in the UK to have fully insured its members benefits, completing the last in a series of four transactions with Legal & General. The Boots Pension Scheme, another Legal & General transaction, plus two pension schemes of the RSA Group constituted the largest ever single and overall transactions, respectively. Five transactions of over £2.5 billion were announced compared to just one the previous year and only ten others between 2014 and 2022.

In the UK alone, annualised volumes are projected to settle in the region of £50-60 billion, a significant increase from the average of £31 billion seen in the five years prior to 2023. Allowing for potential ultra-large transactions, there is also scope for these volumes to spike considerably in any given year.

In the US, volumes in Q4 2023 are expected to have reached over $12 billion, a 50% increase from the $8.1 billion recorded in Q4 2022 and one of the larger fourth quarters seen to date.

This momentum is rolling into 2024 as the US is poised for a potentially record-breaking Q1 at an estimated $15 billion driven by two large, expected transactions. This volume would surpass the previous Q1 record of $6.3 billion in 2023.

As demand increases in both markets, processes are adapting, with the Monitor highlighting repeat transactions in the US and an evolving solutions-focus in the UK as key industry trends.

It notes that soaring demand in both the UK and US should be seen in the context of the c.£1.4 trillion and over $3 trillion of respective DB pension scheme assets still sitting on company balance sheets. This suggests a multi-decade run off and the prospect of healthy markets for many years to come.

Download: PRT Monitor, February 2024 [PDF]