A strong annuity purchase marketplace
The pension risk transfer (PRT) market is continuing to see strong growth, bolstered by heightened interest from plan sponsors due to improved equity market conditions.
An upward trajectory
- Despite a dip in the second quarter of 2021 due to COVID-19 uncertainties, rebounded interest led to $38.1 billion in premiums in 2021, an approximate increase of 40% over 2020 and 27% over 2019.
- Premiums in the first three quarters of 2022 have reached close to $44 billion — making 2022 a record year with a full quarter of premiums left to report.
- Since 2014, 11 new insurance companies have entered the market, for a total of 18 insurance companies now — with more expected to enter soon.
- Buy-ins (versus buy-outs) have been gaining some momentum in popularity.
- Given previous success, some plan sponsors are executing their second or third transactions.
“Increasing costs and strong pricing from insurers looking to transact is likely to incentivize plan sponsors to cut deals that mitigate risks.”
Karen Grote | Senior Director, Insurance Consulting and Technology
Helping clients navigate the market
WTW’s experts support decision making and business objectives in several ways:
Market entry support
- Insights into the market including market landscape, pricing process details and pricing considerations
- Assumption and methodology benchmarking and guidance based on WTW’s 2022 PRT Pricing Assumption Survey, covering 96% of the 2021 market
- Provision of a sample case to price (based on a previously closed deal) and feedback on competitiveness
Transaction support
- Production of all liability and reserve cash flows for initial and any subsequent bids
- Development of applicable mortality assumptions used to value the targeted qualified pension plan
- Support and guidance related to developing an appropriate pricing methodology, including pricing metrics, identification of key risks, development of associated sensitivities, and determination of applicable reserve and capital levels
Deferred life expertise
- Guidance built on decades of defined benefit plan expertise, to help clients understand specific pension plan designs and considerations when setting deferred life assumptions
A unique combination: Insurance pricing and retirement expertise
WTW serves as the global retirement actuary to more employers in the Global Pensions and Investments 300 than any other company.
Over the past several years, we have served as the largest placement advisor in the U.S. pension annuity placement market.
Leveraging our multiple PRT pricing assumption survey results, we assessed the pricing methodology and assumptions of several new entrants to the U.S. PRT market relative to industry practices.
For several current large players in the U.S. PRT market, we provide ongoing bid support on PRT cases, including developing plan cash flows and setting a customized mortality assumption, leveraging off of our work on the WTW Pension Mortality Analysis.
We have undertaken multiple projects involving pricing and product development for fixed annuities, including immediate annuities. As part of these projects, we have developed access to information and views on key pricing drivers and approaches to asset liability management
For several potential new entrants to the U.S. longevity market, we provided a PRT market overview and outlined key considerations for them to participate in the market, including sample quote analysis.
For a current player looking to increase competitiveness on larger cases, we provided guidance on setting mortality assumptions for several cases.
For a new entrant to the PRT market, we undertook a validation of its benefit projection and pricing model.
