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Turmoil Cools Pension Risk Transfer Group Annuity Sales

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The investment market turmoil, business operations turmoil and low interest rates associated with the COVID-19 pandemic chilled the U.S. pension risk transfer market in the second quarter, according to market survey data from the Secure Retirement Institute.

U.S. issuers of single-premium group annuities reported closing $2.3 billion in pension buy-out sales in the quarter, down 46% from the total for the second quarter of 2019.

Resources

  • A copy of the Secure Retirement Institute  group annuity sales report is available here.
  • An article about how a Legal & General executive sees the pension risk transfer market is available here.

The number of buy-out sales fell 35%, year-over-year, to 72.

Single-premium pension buy-in sales fell to $0, from $880 million, according to the pension risk transfer survey participants.

Seventeen companies participated in the survey.

Mark Paracer, an assistant research director with the survey program, said in a comment on the results that the effect of COVID-19 on the economy has clearly affected pension risk transfer sales.

“Fluctuating funding levels and the uncertain timing of the recovery have given employers reason to pause,” Paracer says.

But rising Pension Benefit Guaranty Corp. pension insurance premiums and concerns about pension plan administrative costs are likely to keep the pension risk transfer deal pipeline active, Paracer says.

Legal & General, an insurer with a strong focus on the pension risk transfer market, both in the United States and elsewhere in the world, recently announced a £275 million buy-in transfer deal for a Hitachi pension plan in the United Kingdom, and a £530 million buy-in deal for a Siemens U.K. plan.

— Read The Game of Pension Risk Transfers Continueson ThinkAdvisor.

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