After taking on Bell Canada’s pension plan longevity risk last spring, Sun Life Financial has now announced a combined annuity buy-in transaction with two Canadian pension plan sponsors.

The deal, completed in December 2015, involves transferring investment, longevity and inflation risk to Sun Life. Valued at approximately $530 million, the insurer says this is the largest group annuity in Canadian history.

For confidentiality reasons, the two plan sponsors declined to reveal their identity publicly.

Reducing pension plan risk

Many Canadian defined benefit pension plans provide pensions that increase with inflation and employers are looking for solutions to reduce risk. To help solve this problem, Sun Life created a new combined annuity solution providing inflation-linked annuities at an affordable cost. 

“We are thrilled to be transforming the annuity market, creating an innovative solution to help inflation-linked pension plans reduce risk,” said Brent Simmons, senior managing director, Defined Benefit Solutions, Sun Life Financial.

Risk transfer market hits $7.5 billion in 2015

“Plan sponsors are looking for creative ways to de-risk and this is just one example of how we can help them meet their objectives and focus on their core business,” said Simmons.

This transaction highlights the growing demand for solutions aimed at de-risking pension plans and how the market is evolving to meet that demand. With estimated volumes of $7.5 billion, 2015 was the largest Canadian pension risk transfer market on record. This is three times larger than 2014, Sun Life estimates.