The pension risk transfer market achieved a record-breaking demand with $11 billion in deals at the end of 2024, according to a new report from Telus Health.
The year-end total from 2024 eclipsed the $7.8 billion total worth of annuities transaction volume seen in 2023 and 2022.
The fourth quarter saw $5.2 billion worth of overall transactions, split between $1.5 billion in buy-in and $3.5 billion in buyout transactions, the report said. It noted in 2024 there were more balanced volumes across the first three quarters, a difference from what’s been recorded before.
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The report credited the growth seen in 2024 to large-scale transactions involving fully or partially indexed plans, with an overall cumulative transaction value of $3 billion.
It noted pension risk transfer is growing in its sophistication with increasing ability by insurers to handle more complex benefit and plan structures. Indeed, the market is in a healthy spot due to strong insurer appetite and capacity. However, the report noted there’s finite operational and financial capacity on the side of the insurers.
“This robust activity wasn’t limited to large transactions — a consistent flow of smaller deals highlighted the market’s versatility and accessibility across the full spectrum of plan sizes and demographics, reinforcing the maturity and depth of Canada’s pension risk transfer market.”
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A separate report by Normandin Beaudry found the Canadian group annuity market transactions total for 2024 accounted for a 42 per cent increase compared to the average of the previous three years. Overall, the total deal volume reached $11 billion with $6.8 billion worth of buyout transactions and $4.2 billion in recorded buy-in deals.
The report noted 2024 was defined by both an increase in the number of transactions and the large size of some transactions. Even though there was increased volatility and narrowed credit spreads, the pricing offered by insurers remained attractive for Canadian pension plans.
Smaller pension plans encountered difficulties in finding an insurer to partner with for their risk transfer activity leading to the number of transactions concluding on a “one-on-one” basis with the insurer increasing in 2024. “This strategy can be particularly interesting for smaller transactions that would otherwise attract less interest from insurers,” the report said.
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