Welcome to the 9th annual edition of our WTW Group Annuity Market Pulse bulletin, where we share our insights on 2021. Calendar year 2021 - what a year it was for the group annuity market! The sales volume exceeded the previous annual record by ~50%, fuelled by the strong financial position of pension plans contributing to back-to-back record quarters of sales volume to finish the year. The excitement will continue into 2022 as we expect another busy year!
On the following pages, we will provide an overview of current market players and group annuity sales volume. We will then summarize the key highlights of 2021 in Canada and other key global markets, followed by our observations on the annuity market and current hot topics.
Since 2013, the WTW group annuity team has been offering extensive expertise and experience in Canadian group annuities to provide the best outcomes for our clients. We are proud to have provided advice for over 350 pension plans across the country in assessing whether a group annuity purchase was the right solution. We have innovative tools and experience advising on all sizes of transactions, from the microtransactions (less than $1 million) to jumbo ones, including the largest two transactions completed in Canada during 2020 and 2021.
We would be pleased to discuss this topic with you in more depth and explore risk transfer opportunities for your pension plans.
Ongoing discussions with insurers to be aware of opportunities
Assurance of best practices and use of innovative tools
Calendar year 2021 closed with a whopping $7.7 billion of group annuities sales, driven by jumbo transactions, including the largest 2021 Canadian annuity transaction advised by WTW!
Sales ($ Billion)
1 For 2008 to 2012, the breakdown of sales between buy-in and buy-out for terminated plans and buy-out for ongoing plans is not available.
2 Excludes longevity insurance agreements.
3 Sources of data: LIMRA, Assumption Life, Beneva, BMO Financial Group, Brookfield Annuity, The Canada Life Assurance Company, Co-operators Life Insurance Company, Desjardins Financial Security, iA Financial Group, RBC Insurance and Sun Life Financial.
Who are the players?
4 Decided to withdraw from the group annuity business as of January 1, 2022.
CIA Group Annuity Purchase Discount Rate Guidance (for liabilities with a medium duration)
Yield (%)
There has also been a lot of activity in other key group annuity markets around the world.
Activity remained very high during 2021 with total volume sales of ~USD $40 billion, a substantial increase compared to last few years. Most transactions continue to be retiree buy-outs for ongoing plans, but transactions for large plan terminations are expected over the coming years, which will further increase the market volume. The outlook for 2022 remains competitive and pricing remains favourable, but some insurers are becoming a little selective in periods of high activity. Increased innovation for large transactions, such as buy-ins and advanced commitment arrangements, are picking up momentum and likely to grow in popularity over the coming years.
2021 was a year of two halves in the bulk annuity market: a quieter first half of the year followed up by one of the busiest six months observed in the market. One upside of the slower start to the year, however, was that it was beneficial in helping small and mid-sized deals gain traction, with the average size of deals around £100 million, significantly less than the £200m+ average deal sizes seen in recent years. Meanwhile, the longevity swap market saw continuing innovation. While 2021 was initially slow in the bulk annuity market, the same cannot be said of the longevity swap market, which began with a bang with a significant innovation – the first non-pensioner longevity swap ever completed by a pension scheme with WTW acting as the advisor. For more information on the UK, read the De-Risking Survey Report.
Although we have recently observed increasing volumes of annuity purchase transactions, approaching $40B in the last decade, we have only started to scratch the surface of Canadian pension liabilities in the private sector.
As a matter of fact, we estimate that only ~7% of private enterprise defined benefit liabilities have been insured through annuity purchases through the end of 2021. So far, insurers’ capacity has kept pace with plan sponsors’ demand.
As we turn our attention to 2022 and beyond, we believe the proportion of annuitized liability will continue to slowly but steadily grow as the Canadian group annuity market evolves.
| Title | File Type | File Size |
|---|---|---|
| Group Annuity Market Pulse – 2021 Annual Review | .7 MB |
