Pension risk transfer is a global trend. Since 2007, more than $300 billion in pension liabilities have been transferred to insurers and reinsurers by defined benefit pension funds in the United Kingdom, United States and Canada alone.1 As the global pension risk transfer market continues to evolve and grow, more companies are realizing the economic advantage of managing and transferring pension risk.

In the U.S., the current economic and regulatory landscape has produced desirable conditions that are conducive for pension de-risking. This improving economic sentiment is driven in part by expectations companies will get a boost to cash flow from lower corporate tax rates, infrastructure spending and reduced regulation proposed by the current administration. Today, plan sponsors want to focus on their core competencies and the activities that reward them, their customers and their shareholders.

In a new survey, 21 percent of finance executives said they expect to execute a pension risk transfer agreement in the next two years, while 49 percent who have not yet transferred risk said they have discussed pension risk transfer with their pensions committee, boards or other firms.2 Well-known U.S. firms such as WestRock, United Technologies, PPG and Hartford Financial have recently transferred pension risk to insurers. In the same survey, 72% of those who have transferred risk plan to do so again.

More than $300 billion in global pension liabilities have been transferred since 2007

U.S. All Transactions (Buy-outs and Buy-ins) U.K. Buy-outs and Buy-ins U.K. Longevity Risk Transfer Canada All Transactions (Buy-outs, Buy-ins, Longevity Risk Transfer)
$91 billion $111 billion $92 billion $19 billion
A buy-out is a complete settlement of liability and transfers longevity and investment risk A buy-in is a plan investment that perfectly matches liability Longevity risk transfer converts and unknown future liability into a fixed payment over time

[1] Data In USD. Sources: LCP, Hymans Robertson, LIMRA And Prudential Analysis, As of December 31, 2016.

[2] “Finance Chiefs Express High Satisfaction With Pension Risk Transfers,” CFO Research, August 2017.

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