Pension Plan Terminations, Risk Transfer Up

Pension plan terminations and pension risk transfers (PRTs) increased in the first half of 2022, says a recent report. 

In fact, says Aon, there was “record” activity in the first half of 2022—an increase in not only plan terminations, lift-outs and buy-ins over those of the same period one year before. 

Notable transfers in the first two quarters of 2022, says Aon, were:

• Lockheed Martin to Aetna, $4.3 billion;
• Pactiv Evergreen to MetLife, $1.38 billion; and 
• Peabody Energy to Prudential, $500 million. 

Aon also reports on additional developments in the first half of 2022:

• Federal monetary policy. This is an additional factor in play, says Aon. That policy, as well as rising interest rates, in turn have affected PRTs, since insurers use them to set prices for PRT transactions. Consequently, Aon says, insurers’ quotes reflect plan liabilities. They found that insurer pricing was around 100% of a plan’s pension benefit obligations.
• Annuity purchases. Pension plan terminations in the first two quarters of the year increased to such an extent, Aon reports, that they led to annuity purchases that were 50% higher than those in the first half of 2021. 
• Buy-ins. While it calls them a “niche solution,” Aon says that they nonetheless resulted in the transfer of $2.7 billion in the first quarter alone. 

The bottom line, says Aon, is that there were at least 204 transactions in the first half of 2022, entailing $17.1 billion in premiums.