Pension Risk Transfers Moved Down Market in 2015

Insurance companies reported selling more than 300 separate pension risk transfer contracts under $100 million during 2015.

With five separate companies reporting buy-out sales above $1 billion, group annuity risk transfer sales increased a very solid 54% in 2015, totaling $14.4 billion, according to LIMRA Secure Retirement Institute’s U.S. Quarterly Group Annuity Risk Transfer Survey.

LIMRA’s research shows, in the fourth quarter, group annuity risk transfer sales were $5.8 billion, “which is nearly 19% lower than the previous year when a jumbo contract (defined as larger than $1 billion) was sold.” 

“In prior years, significant market growth was a result of one or two jumbo-deals, like the deal between Prudential and General Motors in 2012,” says Michael Ericson, LIMRA Secure Retirement Institute analyst. “This year we saw broad growth across the industry and many of the sales came from smaller plans. Companies reported selling more than 300 separate contracts under $100 million.”

Ericson notes that the latest numbers show the final quarter of 2015 was the first time pension risk transfer annuity sales have exceeded $3 billion for three consecutive quarters. “For the year, buy-out products accounted for more than 95% of the total group annuity risk transfer market,” he adds, “totaling $13.6 billion. This is a 61% increase from 2014 levels.  Annual buyout sales have only eclipsed $10 billion one other time, in 2012.”

Single-premium buy-in product sales were $7.2 million, LIMRA finds, down 95% from 2014. To date, there have only been five single-premium buy-in contracts sold, the report explains. Total assets of buy-out products increased 10%, to $90 billion at the end of the fourth quarter 2015. 

“With PBGC premium increases, market volatility and continued low interest rates, employers are becoming more interested in transferring their pension risk to an insurer,” Ericson concludes. “The Institute expects this trend to accelerate in the next few years.”