Industry Watch - Overview of the 2021 Canadian group annuity market
DB Solutions Industry Watch
Overview of the 2021 Canadian group annuity market
Over 70 plan sponsors purchased annuities
Over 300 plans sponsors in the past five years
Over 15 plan sponsors had previously purchased annuities
Plan sponsors are expanding their partnerships with insurers
Protecting DB pensions for Canadians
Another 25K Canadians had part or all of their pension insured
This brings the total for the past five years to over 125K Canadians
A game-changing year for pension risk transfer
Market dynamics have shifted
The Canadian group annuity market has great momentum and is on its way to the next major milestone in the near future!
As transaction size has increased over the years, in 2021 there was also a record number of 22 deals over $100M.
Market dynamics changed in 2021, as described by LifeWorks: “Increased plan sponsor demand combined with a limited insurer supply meant that insurers focused their resources on their most desirable liabilities; this translated into competitive pricing for a given transaction and, in some instances, a smaller number of participating insurers.”
Demand for inflation-linked annuities is growing
$2.6B since 2015, $600M in 2021
Reducing inflation risk
The industry successfully transacted in the recent past on plans with varying inflation-linked formulas, e.g., full CPI, partial CPI, formula with offsets, caps or floors.
Increased competition and innovation mean more affordable options for plan sponsors to transfer inflation-linked liabilities to insurers, reducing their inflation risk.
Transferring a portfolio of inflation-linked assets as part of a group annuity purchase can improve pricing for the plan sponsor.
Hear more on inflation from Ashwin Gopwani, Managing Director, Client Solutions at SLC Management on this Three in five podcast.
Buy-ins are now as popular as buy-outs
2017-2021: Buy-ins $12.9B, Buy-outs $12.7B
The scale shifts depending on the largest transactions in any given year
Buy-ins and Buy-outs
Group annuity buy-ins and buy-outs solve different challenges for plan sponsors. In a competitive market, they are both efficient solutions and are traditionally priced exactly the same.
Buy-ins have increased in popularity in recent years. There have been more than 165 transactions for $16.7 billion in liabilities since 2009.
Source: LIMRA
| Year | Buy-ins ($B) | Buy-outs ($B) |
|---|---|---|
| 2017 | 2.1 | 1.6 |
| 2018 | 0.6 | 4.0 |
| 2019 | 2.7 | 2.5 |
| 2020 | 2.9 | 1.5 |
| 2021 | 4.6 | 3.1 |
| TOTAL | $12.9B | $12.7B |
Sun Life led the group annuity market in 2021
14
We worked with 14 plan sponsors to successfully de-risk their plans
170K
We made more than $1B in annual pension payments to over 170K Canadians
#1
We’re proud to have the largest market share for the 14th year in a row
Group annuities provided by Sun Life Assurance Company of Canada, a member of the Sun Life group of companies. Results based on the Secure Retirement Institute® Canadian Pension Market report published by LIMRA, February 11, 2022 and Sun Life estimates.