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US and UK Pension Risk Transfer Markets Now Stabilised Following Pandemic Pullback
Transaction volume accelerating in US putting it on pace for a potential record year
6 Aug 2021
The Legal & General Group’s global pension risk transfer 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 a special cross-market edition of their Pension Risk Transfer (PRT) Monitor, which analyses industry trends and market outlooks.
The Monitor reports a robust deal pipeline for the second half of the year in both markets, with accelerating transaction volume particularly in the US where there is the potential for a record-breaking annual market volume between $30-40 billion (£22-29bn), following a pandemic-induced slowdown in 2020.
In the UK, the Monitor reports that relative to the first half of 2020, it has been a quieter start to the year across the market —however, there is strong demand across the full range of transaction sizes, particularly at the smaller and mid-sized end of the market. Given the current strength of the UK deal pipeline, the second half of the year is expected to be very busy and the Monitor estimates the annual market volume will be around £25 billion (US$34.5bn).
After a slow start to the year, and a dip to £21 billion ($27bn) in US market volume in 2020i, the latest Monitor finds the US PRT market experiencing a strong rebound. It is estimated that volume for the first half of the year in the US grew more than 26% to £6 billion ($8.5 bn), from £5.3 billion ($6.7 bn) the year priorii.
The latest Monitor reveals that interest in pension risk transfers remains strong and competition among insurers is fierce as economic recovery continues in both the UK and US markets.
Legal & General’s report concludes that the PRT market is continuing to evolve in a beneficial way for pension plans considering risk mitigation solutions. If interest rates rise from their near-record lows, unhedged plans will see their funding status improve as liabilities decrease, making PRT more attractive. This, combined with the strong competitive dynamics between insurers, means pension plans with clear objectives will find numerous opportunities later this year to secure a competitive deal.
The complete PRT Special Edition US and UK PRT Market Overview can be found here.
George Palms, President of Legal & General Retirement America: "The level of activity and demand in the US market today should put to rest any lingering concerns about the pandemic’s long-term effect on this industry. The interest rate and market volatility the world has experienced over the past 18 months seems to have only reinforced for corporate managers the value of mitigating pension risk."
John Towner, Head of New Business, Legal & General Retirement Institutional: "With the improvement in pension plan funding levels this year, we continue to see strong demand in both the UK and US for pension risk transfer. Sponsoring companies in both countries are increasingly looking to insurers to take on responsibility for their pension obligations and help them reduce their pension exposures. We are expecting a very strong second half of the year in both the UK and US with a number of large transactions coming to market."
Further information
Margrit Williams
Director of External Engagement
Legal & General Capital
Notes to editors
Established in 1836, Legal & General is one of the UK's leading financial services groups and a major global investor, with £1.2 trillion in total assets under management (as at HY24) of which c40% (circa £0.5 trillion) is international.
We have a highly synergistic business model, which continues to drive strong returns. We are a leading international player in Institutional Retirement, in Retail Savings and Protection, and in both public and private markets through our Asset Management division. Across the Group, we are committed to responsible investing and dedicated to serving the long-term savings and investment needs of customers and society.
As at 11 December 2024, Legal & General has a market capitalisation of 13.7 billion.
Institutional Retirement works with trustees and sponsoring companies of defined benefit (DB) pension schemes of all sizes to settle their pension obligations and secure scheme members’ benefits, through a full range of buy-ins, buyouts and other de-risking solutions. Our Client Services’ 12-month rolling Net Promoter Score (NPS) is above +70, which is widely regarded as being at a “world class” level. Legal & General is the UK’s longest-standing active bulk annuity provider.
Our UK Retirement annuity book stands at an estimated £86.1 billion at 31 December 2023. Across the group over £30 billion is invested in direct investments that deliver positive social and environmental impacts, such as clean energy and affordable housing. Legal & General provides income and pension security to more than a million retirement customers around the world.