A new brief from the Reinsurance Group of America (RGA) on Canada’s pension risk transfer (PRT) market says this business is evolving rapidly, thanks to demographic shifts, increased life expectancy and proactive risk management on the part of plan sponsors, creating opportunities, they say, for reinsurers to provide innovative solutions.
“Reinsurance is revolutionizing Canada’s PRT market, providing crucial capacity and expertise,” they state. “The Canadian PRT market is undergoing a remarkable transformation. Once characterized by modest transactions, it is evolving into an arena of large-scale de-risking deals that are fundamentally altering how Canadian plan sponsors and insurers approach long-term financial obligations.”
The reinsurer very briefly nods to its collaborators and competitors in the space, saying the market benefits from a maturing, sophisticated network, “comprising multiple carriers and consultants who bring specialized knowledge to the pricing, underwriting and structuring of customized de-risking solutions. By any global metric, the growth trajectory of the PRT market in Canada has been significant.”
Four market drivers
The four market drivers discussed in the report include demographic shifts, increased life expectancy, increased solvency ratios and proactive risk management.
“In 2024, seniors comprised 18.94 per cent of the Canadian population, up from 12.55 per cent in 2000,” the paper states. “This trend has led to a higher proportion of retirees relative to active workers, putting increased pressure on pension plans to meet long-term obligations,” they write. The number of pensioners in Canada’s national pension plans are expected to increase by 225 per cent between 2019 and 2050.
Solvency ratios are another key driver: “The percentage of pension funds in this measurement below a 100 per cent solvency ratio has decreased from 16 per cent at the end of 2023 to 11 per cent at the end of 2024, while those in at 120 per cent or above have risen from 47 per cent to 57 per cent,” they write.
They add that “plan sponsors are increasingly recognizing the need to address pension risks before they become unmanageable,” all of which is contributing to a market, they say is poised for growth and innovation. “Reinsurance will play a central role,” they write.
