Pension risk transfers will be among the fastest-growing product lines in the life insurance sector, J.P.Morgan Chase & Co. found in a “North America Equity Research” report out last month.
According to the firm, U.S. private sector employers have legacy frozen and/or closed defined benefit pension plans with assets totaling $3.2 trillion in assets. Many firms have already shifted their DB liabilities to insurers through PRT transactions.
Both macro and secular factors are behind the significant PRT market growth over the past decade. J.P. Morgan’s models project PRT transaction volumes to approach $100 billion annually over the next six to seven years. According to the report, the firm also expects the liability shift to continue due to improved funding levels for plans, rising Pension Benefit Guaranty Corporation premiums, pushback from investors, better pricing/terms offered by insurers and a greater number of insurers entering the PRT market.
“Certainly, there has been a lot of competition—many, many new entrants because of the trajectory of this market,” says Melissa Moore, a senior vice president and head of annuities at MetLife. “There is still … almost $3 trillion of liability sitting on private plan sponsors’ balance sheets.”
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Higher interest rates and a strong equity market have also been key catalysts for the pension risk transfer market, J.P. Morgan found. The solid performance of the equity market over the past 15 years has improved the funded status of DB plans, making it easier for corporations to transact on previously underfunded plans. In addition, a rise in interest rates since 2022 has lowered pension liabilities, allowing plan sponsors better terms and conditions from insurers, and improving the cost for plan sponsors to transact.
In June, offloading retiree pension risk to insurance companies became less expensive for plan sponsors, according to Milliman’s Pension Buyout Index, which tracks the cost of de-risking pension funds. The firm estimated that in a competitive bidding process, average costs of a competitively bid pension risk transfer declined to 100.8% from 101.1% in May.
Moreover, in its “July 2025 Pension Risk Transfer Update,” October Three Consulting found that PRT activity totaled $7.1 billion in the first quarter of this year, down 51% from a historic high in Q1 2024—but still 10% higher than Q1 2023. Despite the slowdown earlier this year, the PRT market is now accelerating, the firm found, indicating that plan sponsors looking to de-risk should engage an annuity consultant “sooner rather than later” to achieve their goals.
Risky Business
The report named interest rates, credit, the equity market and longevity as key risks of PRT deals. J.P. Morgan indicated it is most concerned with longevity, specifically for insurers with limited mortality risk exposure, due to potential medical advances. Regulatory scrutiny of PRT deals has also increased, threatening slower market activity to come.
Generally, PRT blocks covering benefits for working-age individuals are riskier than those with retiree populations, because younger individuals stand to live longer, necessitating higher allocations to equities and alternatives investments to provide a longer annuity benefit. The firm found that insurers’ pricing assumptions for PRT/longevity deals do not seem to adequately reflect the likelihood of life expectancy improvement.
Time will tell the ultimate profitability of the product line, J.P. Morgan concluded. PRTs offer attractive growth in a slow-growth sector but entail risks of their own.
Who Benefits?
Among the companies J.P. Morgan covered, Corebridge, MetLife, Principal Financial, Prudential and Reinsurance Group of America are best-positioned to benefit from the growth of the PRT market, the report found. RGA, notably, has the highest mortality exposure—safeguarding it from longevity risk inherent in PRT deals. Still, for the companies that stand to benefit the most, the PRT business accounts for less than 10% of their income.
MetLife stands to benefit from a booming PRT market because it has been involved in several notable PRT deals since joining the “jumbo segment of the market” via a $6 billion transaction with FedEx 2018. The firm’s most notable transactions have included a $16 billion IBM transaction in 2022, which it split 50/50 with Prudential. In addition, in December 2024, MetLife and General Atlantic announced the formation of Chariot Re, an independent, Class E, Bermuda-based life and annuity insurance company, which launched this month by reinsuring approximately $10 billion of liabilities.
“The PRT market really plays to [our] strengths,” says MetLife’s Moore. To her point, J.P. Morgan found that MetLife’s diversified liability profile and exposure to mortality risk allow it to tolerate longevity risk.
“Plan sponsors’ … mortality assumptions … have gotten a lot more sophisticated,” Moore says. “We get those mortality assumptions from plan sponsors, which helps us to better align pricing.”
Prudential, MetLife’s partner in the 2022 IBM deal, has also catalyzed PRT activity and stands to grow, J.P. Morgan found. Prudential closed deals with General Motors for $29 billion and Verizon for $7.5 billion in 2012. More recently, Prudential disclosed it had closed roughly $16 billion in PRT transactions in 2024. J.P. Morgan found that Prudential’s asset management capabilities and mortality exposure also portend a positive trajectory.
Tags: corporate defined benefit, JPMorgan Chase & Co., life insurance, Pension Risk Transfer
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