The pension risk transfer (PRT) market in Canada is dynamic, growing in sophistication and is consequently reaching new heights, according to TELUS Health.
The company’s quarterly Pension Risk Transfer report, 2024 Year-end review estimates that more than $11-billion in annuities were transacted in the market in 2024, with the fourth quarter contributing $5.2-billion to the total. Broken down, the quarterly contribution included $1.5-billion in buy-in annuities and $3.5-billion in buy-out transactions.
“Unlike previous years, 2024 saw more balanced volumes across the first three quarters. Nevertheless, the fourth quarter maintained its typical strong performance, reflecting the market’s resilience and growth,” TELUS Health researchers write. “This robust activity wasn’t limited to large transactions – a consistent flow of smaller deals highlighted the market’s versatility and accessibility across the full spectrum of plan sizes and demographics, reinforcing the maturity and depth of Canada’s pension risk transfer market.” They add that opportunities continue to exist in 2025, “across the spectrum, from large-scale transactions to a diverse range of smaller deals.”
Record-breaking demand
Against the backdrop of record-breaking demand, TELUS observes that insurer appetite and capacity also remains strong. That said, they add that insurers have finite operational and financial capacity, making them “challenged to tolerate a lack of preparation or inexperienced advisors guiding the transaction. If plan sponsors and fiduciaries want deal and value certainty, we advise that they increasingly need to be working with the major players in the consulting market,” they write.
In 2024, bond yield volatility and fluctuations throughout the year had important implications for PRT activities, as volatility can lead to funding ratio instability. Strong equity performance, meanwhile, improved the asset side of pension balance sheets, offsetting some of the volatility-induced liability fluctuations. Funding ratio volatility, they add, emphasizes the importance of dynamic risk management strategies. “The fluctuating interest rates made timing decisions for risk transfer activities more critical,” they write.
Annuity purchase rate
As of Dec. 31, 2024, the annuity purchase rate stood at 4.72 per cent while the accounting rate was 4.67 per cent. “Notably, the annuity purchase rate surpassed the accounting rate during the quarter. This favourable spread created opportunities for plan sponsors to potentially realize accounting gains through annuity purchases. This development significantly contributed to the robust activity observed in the Canadian pension risk transfer market throughout 2024.”
