A strong fourth quarter propelled the US pension risk transfer market to its third strongest year on record, as $28bn in aggregate premium drove the 2025 total to approximately $49bn. Aggregate premium gets the headlines in the PRT space, and so the $7bn sold in the first quarter might appear to be relatively derisory on the surface, but in terms of activity, the market remained robust as the 127 contracts sold in the first quarter were only 13% fewer than in the same period in 2024.
Insurers are favouring funded re as it helps firms manage the market and longevity risks associated with writing bulk purchase annuity (BPA) business by reducing capital charges and therefore making PRT deals more competitive.
Unsurprisingly, given its growth and potential for capital optimisation, UK regulators have been carefully watching the increased use of funded re. In June 2023, the Prudential Regulatory Authority (PRA) sent a “Dear CRO’ letter to heads of risk at UK life insurers.
The letter outlined the regulator’s two main concerns from a sectoral review which it had carried out.
“One of the key risks arising in funded re is that firms recapture sub-optimal portfolios with depressed values and with limited ability to be transformed effectively to the firms’ preferred portfolio,” the PRA letter said.
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