Pension risk-transfer market sees $5.2BN in transactions in 2019: report

The pension risk-transfer market had another record-breaking year for transactions in 2019, according to Eckler’s latest report.

Transactions for the year came to $5.2 billion, with buy-in annuities taking the lead as the dominant risk-transfer strategy with sales of almost $2.6 billion. The average transaction size continued to rise, increasing by 40 per cent, from $40 million on 2018 to $56 million in 2019.

The year also saw a number of firsts for the market. A reinsurance company completed its first transaction in the Canadian pension risk-transfer market market for more than $200 million. An insurer made its largest single annuity purchase and its first in-kind asset transfer in a transaction valued at more than $300 million and four insurers co-ordinated on a buy-in annuity for more than $800 million, representing the most insurers ever to participate in a single deal.

Read: Annuity sales hit record highs in 2018, led by buyouts: report

As well, a relatively new entrant to the market, Assumption Life, announced it would be temporarily ceasing its participation in the market for group annuity purchases, bringing the number of insurers currently participating in the Canadian market down to eight.

Sun Life and RBC Insurance maintained their spots as the top two companies by market share spots in 2019, but the competition is heating up, the report noted. Brookfield Annuity overtook the Bank of Montreal to claim third place, with 13 per cent of the market. And the total share of the top three insurers fell from 72 per cent in 2018 to 64 per cent in 2019. iA Financial Group, notably, went from five per cent to 12 per cent of the market in 2019, while Canada Life’s share dipped slightly, from 13 per cent to 11 per cent.

Looking ahead to the rest of 2020, the report noted it remains unclear how the coronavirus pandemic will impact the risk-transfer market. “For many plan sponsors, the impact of COVID-19 will be a significant adverse effect on plan funded ratios,” it said. “In fact, the Office of the Superintendent of Financial Institutions has issued a directive imposing a temporary hold on all commuted-value transfers and buyout annuity purchases without regulatory consent. Broadly speaking, annuity purchases may have been placed on hold due to deteriorated funded status, market uncertainty and volatility, and lack of market liquidity.”