The US pension risk transfer (PRT) market is experiencing rapid growth, fueled by regulatory changes, favorable economic conditions, and a heightened focus on reducing financial risks. Key trends include increased plan terminations, the growing adoption of de-risking strategies, rising interest in buy-ins, and the emergence of sidecar solutions. PRT transactions, which encompass lift-outs, plan terminations, and buy-ins, are available in various sizes, with small plan sizes seeing the most significant growth.

The evolving regulatory landscape is prompting companies to adopt PRT to mitigate pension plan risks while ensuring guaranteed pensions for employees. The South region leads the market, driven by the presence of Fortune 500 companies and widespread use of full plan terminations. Advances in technology, such as actuarial modeling and data analysis tools, are improving efficiency in PRT transactions. Rising pension plan funding levels, boosted by interest rates and strong equity markets, are also making PRT transactions more attractive to insurers and plan sponsors.

Recent Vendor Activities

In 2024, Cuna Mutual Group Retirement rebranded to TruStage. It unifies under one brand. This includes both executive and retirement benefits. The rebrand will bring the customers to continue to navigate their required products or services. Is a company, that delivers insurance, investments, and technology solutions that are designed to help meet a diverse range of needs. It offers various pension risk transfer services in the U.S. market.
In 2021, Lockheed Martin Corporation, a defense and aerospace manufacturer in the U.S., purchased group annuity contracts from Athene Holding, a leading retirement services company, to transfer approximately $4.9 billion of Lockheed Martin’s pension obligations. It will be useful for around 18,000 retirees and beneficiaries.

U.S. Pension Risk Transfer Market Trends

Increased Plan Termination A growing trend in the U.S. pension risk transfer market is the rise in plan terminations. Companies are increasingly choosing to eliminate the risk and volatility associated with defined benefit pension plans by transferring responsibilities to insurers. This decision is driven by factors such as a focus on core business activities, the need to reduce risks related to longevity and investments, improved financial reporting, cost savings, and favorable market conditions. Plan terminations help companies achieve cost savings and risk reduction by selling benefits to annuity providers or offering lump-sum payouts to participants, reducing the administrative burden.

Rising Adoption of De-Risking Strategies The adoption of de-risking strategies is gaining momentum in the U.S. pension risk transfer market. De-risking involves actions like pension risk transfers, changes to investment strategies, and modifications to plan designs to protect investments and ensure long-term sustainability. By transferring pension obligations to insurers through buy-ins or buy-outs, companies reduce financial risks. Additionally, many plan sponsors are outsourcing pension plan management to better position themselves for success in a volatile economic environment. The growing use of tools like lift-outs is helping companies de-risk their pension plans and adapt to regulatory changes, unpredictability, and increasing pension costs.

Dominance of the Southern Region in the U.S. Pension Risk Transfer Market

The Southern region of the U.S. leads and holds the largest share of the pension risk transfer (PRT) market. This region, which includes states such as Texas, Florida, Georgia, North Carolina, Tennessee, and Virginia, is experiencing significant growth due to its robust base of Fortune 500 companies and a tech-savvy population. Economic expansion has positioned the South as an attractive hub for corporate headquarters, resulting in an increased likelihood of companies with defined pension plans opting for PRT transactions.

In addition, the healthcare sector in the South is expanding, supported by a strong manufacturing base and a high concentration of hospitals. Approximately 13% of the region’s civilian workforce is employed in healthcare. The hospitality and leisure industries, particularly in Texas and Florida, are also thriving, along with a rise in event planning businesses. As these industries continue to grow, the demand for small and mid-sized PRT transactions in the South is expected to increase during the forecast period.

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