The US pension risk transfer (PRT) market is not saturated, with new players expected to soon enter the market, and there are also opportunities to focus on plans with deferred lives.
This was one of the takeaways from yesterday’s InsuranceERM webinar, in association with the Banner Life family of companies, on unlocking opportunities in a shifting US PRT market.
The number of insurers participating in US PRT has continued to grow. There are currently 22 insurers actively bidding for PRT business, up from12 in 2012. Annual PRT volumes in the US have remained above $45bn for the last three years.
During the webinar, Keith Golembiewski, assistant vice president and head of annuity research at member association Limra, said his view is that the PRT market is not at saturation point.
“There are 22 active carriers out there today. I know there are one or two that are planning to enter this space. If we think the market's still going to grow or stay around $50bn [in volume], I think there are opportunities for some other companies. There is plenty to go around.”
As the US PRT market matures, Golembiewski said the focus is moving to deals with more complexity, such as plans covering deferred members.
In the US PRT market, PRT deals covering deferred members are pension plans where most members have not yet started receiving their pensions. Pension plans in the US coming to market with large numbers of deferred lives pose PRT insurers challenges and uncertainty.
For example, insurers cannot be sure when deferred members will start drawing on their pensions, as some may retire early or late, which can affect the size of the benefit. Nor do insurers know what type of annuity that deferred members will choose.
During the webinar, Golembiewski acknowledged the complexity of PRT deals covering deferred members, such as price uncertainty, behavioural aspects of participants and asset strategy.
Nevertheless, he said there may be an opportunity for other annuity carriers to focus on this part of the market.
Nick Kraver, a partner at Aon, said there has been some better pricing on deferred lives, and if more insurers take on these deals, they should become more comfortable with them.
Commenting on the importance of good customer service in securing PRT deals, David Wagner, director of PRT strategy and execution at Banner Life, said: “Banner Life has built its PRT business on the foundation of quality in-house administration, and we do see it as a differentiator for us. Having in-house administration allows us to be more flexible, agile and responsive to client needs.”
These themes and more are explored in InsuranceERM’s US PRT special report, produced in collaboration with the Banner Life family of companies. The report is free to download here.
To view the US PRT webinar cited above in the article, which is available on-demand, click here.