Pension Risk Transfer Gains Momentum in a Low Interest-Rate Environment

The pension risk transfer space continues to proliferate, with plan sponsors from an array of market sectors, firm sizes and geographical locations proactively transferring pension risk to insurance companies.

In fact, over $250 billion in global pension de-risking transactions have occurred since 2007, with more than 43 transactions of over $1 billion each having been completed in the United States, United Kingdom and Canada. In the US, a spike of de-risking activity has taken place among small- to mid-sized plans, with several mega transactions having been executed as well, including five de-risking transactions of $1 billion or greater since year-end 2012. The UK has been the world leader in pension de-risking, however, with approximately $167 billion in transactions and 36 transactions of $1 billion or larger.

British Telecom, Motorola Solutions, Bristol-Myers Squibb, AkzoNobel and Visteon are some of the more well-known firms to transfer pension risk in 2014, while 2015 has seen so far such industry leaders as Kimberly-Clark and Timken complete pension buy-out transactions, and Bell Canada Enterprises announced the first longevity risk transfer agreement to occur in North America. And while each of these agreements was unique in terms of strategy, they all shared the mutual goal of realising a lower-risk future.

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