Canada’s pension de-risking market saw a record-breaking year in 2022, with $7.8 billion in transferred liabilities and 155 transactions, according to a new report by Eckler Ltd.
Mary Kate Archibald, pension principal at the consultancy, says the increase in the total sum for the year wasn’t a surprise due to the interest rate environment. To stave off rising inflation, the Bank of Canada has hiked interest rates 10 times in a row since March 2022.
“When interest rates go up, the cost of annuitization generally goes down.”
Alongside an increase in competition from other companies, Sun Life Financial Inc.’s leadership position took a hit last year, noted the report, which found the insurer’s market share shrunk by nearly two per cent last year. However, Sun Life still holds almost 30 per cent of the total market share, with its balance of buy-in transactions in 2022 averaging $106 million per transaction.
Over the past few years, Archibald has seen significant changes in the market share landscape among insurers. One change is the speedy rise of Brookfield Annuity Co., now in second place in market share behind Sun Life.
“One of the differences is that some of the other players, the cooperators being the smallest share, they would only bid on the very small quotes, some insurers only bid on certain profiles or they reach their market caps or constraints earlier in the year and stop bidding, but Brookfield Annuity bids on pretty much everything.”
Since Brookfield Annuity launched six years ago, it now holds a 26 per cent market share. In 2022, it totalled 28 transactions, with an average size of $72 million.
Among the other insurers, Desjardins Insurance had a 15 per cent market share, followed by the Bank of Montreal (14 per cent) and iA Financial Group (10 per cent), RBC Insurance (four per cent), Canada Life Assurance Co. (three per cent), the Co-operators Group Ltd. (one per cent).
RBC Insurance saw the steepest decline in its position at the end of last year due to a 17 per cent drop year over year.