Total US pension risk transfer (PRT) new premium was $7.1bn in the first quarter of 2025, according to LIMRA’s U.S. Group Annuity Risk Transfer Sales Survey. While this is 51% lower than the record-high sales set in the first quarter of 2024, at 127 contracts, the market contracted only 13% from prior year. Greg Winterton caught up with Carl Groth, Chief Risk Officer at Legal & General Retirement America, to get his thoughts on the state of the market as we enter H2.
GW: Carl, pension risk transfer activity in the US so far this year is down when compared to 2024. What have been the main drivers of the pullback?
CG: One driver is a reduction in the jumbo (multi-billion) deals throughout the first half of the year. These big deals can drive up market volumes considerably and reduce volumes when they do not go to market. We saw fewer jumbo deals in the first half of this year compared to last year. However, the market for non-jumbo deals looks to be picking up as we are starting the second half of 2025.
GW: How do you assess and manage the long-term liabilities associated with pension risk transfer deals, especially in an interest rate and mortality environment that is arguably unclear at present?
CG: I will address mortality first. We devote considerable resources to the science of mortality. For example, we study the uptake and impact of new drugs, such as semaglutides and trends in various forms of disease across demographic groups. This effort helps us calibrate longevity trend factors used in our pricing. Additionally, we use a multifactor model to predict longevity and update the model regularly. The size of our PRT back book is considerable and enables us to back test actual results against pricing assumptions and make any necessary adjustments.
Management of interest rates is primarily done through ALM – matching asset duration or cash flows to the liability asset duration or cash flow depending on the size of the business and the regulatory requirements. We run sensitivities and stresses to get comfortable with the ability to stay reasonably matched.
GW: What trends are you observing in plan sponsor behaviour, and how are those trends shaping insurer appetite or approach to PRT transactions?
CG: In general, plan sponsors remain keen to derisk. The derisking process often takes several years and as such, can be temporarily interrupted by more pressing business issues. An example of a pressing business issue that is affecting some plan sponsors this year is assessing the potential impact of tariffs on their business. This issue can take time away from the same individuals that might be involved with taking a case to market (e.g. the Finance function).
GW: What are the key operational and counterparty risks in executing and managing large PRT deals, and how do you oversee them at the enterprise level?
CG: For insurers that also provide the administration for their annuitants, that implicitly involves operational risk throughout the life of a deal. Other operational risks might include model or human errors in pricing, information security risk, and risks inherent in the investment management process. In our case, counterparty risks in the traditional sense, are limited to a relatively small amount of reinsurance and or partnering on deals.
These risks are overseen at various levels, beginning with the first line of defence that provides a solid foundation for risk oversight. Each entity and major business within each entity should also have its own risk committee, with risk committees at the group level as well.
GW: Lastly, Carl, how do you see the US PRT market evolving over the next three to five years, and what are the main strategic or systemic risks you think the industry should be preparing for?
CG: I see the US PRT market continuing to flourish over this time horizon and expect market volumes to be driven by the presence or absence of the multi-billion dollar deals as mentioned earlier. One area that I would highlight is the growing number of competitors in the space. There are currently over 20 insurers active in the PRT market and high demand from plan sponsors. While this increased activity brings innovation and choices to plan sponsors, it also means careful attention must be paid to pricing discipline and risk management. Ultimately, I believe market dynamics and responsible management will foster continued growth.
Carl Groth is Chief Risk Officer at Legal and General Retirement America
