‘Success today depends on governance, readiness, operational preparation, and the ability to execute efficiently,’ says Katie Pries
The Canadian pension risk transfer (PRT) market has shifted from opportunistic deal-making to something more structural. Plan sponsors are no longer waiting for the right moment to de-risk. They are building frameworks to act when the moment arrives.
This the view espoused by both Katie Pries and Christopher Dvorak at Northern Trust. According to Pries, pension risk transfer has moved “from being a tactical opportunity to a mainstream financial management tool," she said.
“As many Canadian pension plans reached stronger funded positions over the past few years, sponsors were able to think more strategically about locking in gains rather than just managing volatility year to year. And as a result, PRT activity surged, then normalized rather than disappearing, which tells us this is more of a structural shift in the market. And many sponsors are now taking a stance and asking more fundamental questions about whether they want to continue running pension risk at all. At the same time, the market itself has matured, and sponsors are more informed, insurers are more selective, and transactions are more complex so success today depends not just on pricing, but on governance, readiness, operational preparation, and the ability to execute efficiently,” said Pries, country executive for Northern Trust Canada.
“The big takeaway here is that preparation will rule the day,” added Pries. “The key theme going forward is I would call institutionalization. Pension risk transfer is embedded in long‑term pension strategy. Sponsors that are investing in that governance and data quality and operational readiness will be the best positioned to take advantage of opportunities as they arise.”
Dvorak, practice executive, asset owners at Northern Trust agrees with Pries, adding context from his vantage point working with large insurance carriers in the US. He characterizes the current environment as anything but ordinary, shaped by market volatility and the forces driving transaction activity. Pension risk transfers have been around for more than a decade and has matured over that time, though transaction volumes have pulled back recently. He points to 2024 as a standout year in both Canada and the US, driven largely by where interest rates were positioned. The market determines when activity happens, but when it does, both sides stand to gain.
Pries noted a shift in how sponsors are framing the question. Rather than asking whether now is the right time to transfer risk, many are asking whether they want pension risk on their balance sheet at all.
“It doesn't mean every sponsor is pursuing a full exit, but many are taking this phased approach and using annuity transactions or longevity transfers to reduce the specific risks over time,” she said.
Dvorak sees market forces as the common thread linking PRT activity on both sides of the border. Canadian and US markets move in relative lockstep, and the current administration's tariff policies are hitting companies in both countries and even across the pond. The US market has historically produced larger transactions and has more insurers participating, but the underlying dynamics are similar.
Yet one of the biggest challenges for plan sponsors right now is volatility, he noted, adding when markets turn choppy, sponsors pull back and become cautious about the impact on their portfolios. Rising rates had pushed funded positions into strong territory, prompting serious conversations about de-risking. But the turbulence that began in early 2025 has changed the calculus.
Dvorak argues that sponsors need to build trigger-based frameworks - pre-set thresholds tied to funded status that signal when to act. Plans with portfolios weighted toward liability-matching assets are better positioned to execute when windows open. The insurer side of the market is also constrained, with a limited number of carriers doing this work.
Data is central to overcoming those constraints, in Dvorak's view. Insurers need confidence in the participant information before committing to a rate and data quality is a foundational element of any successful transaction. Plan participants carry years of tenure, and the structure of their benefits has evolved over time. Insurers need to understand exactly what they are assuming, which makes transparency around participant data critical. The quality of that data can make or break the deal, he said.
“A plan sponsor really needs to have really solid data to get that insurance provider comfort on really what they're getting into and the composition of all their plan participants and the details around that,” he said. “To truly overcome the challenges is to have a really good data story of truly understanding their participants. And that's going to allow an insurer to come in and feel really good about the rate they're giving and getting into a transaction.”
He also notes a trend toward phased transactions, where sponsors segment their participant pools, starting with pensioners, then moving to deferred members, and finally actives. While this approach is more common in the US, he’s uncertain how prevalent it is in Canada.
Closed plans make the process simpler, but even plans still open to accrual sometimes prefer to phase in. Sponsors often stick with the same insurer across phases, building familiarity with the structure and process.
Portfolio composition is the third lever, notably as investors typically favour fixed income, high liquidity, and straightforward holdings – assets they can absorb and manage without complexity, while private investments, derivatives, and other esoteric instruments create friction. A portfolio built around investment-grade bonds and government securities puts the insurer in its comfort zone and smooths the path to execution, he noted.
Meanwhile, Pries sees a shift in Canada from reactive decision-making to structured de-risking frameworks as sponsors are setting pre-approved parameters that give management teams and pension committees the authority to act within defined limits, rather than returning to the board every time market conditions shift.
Given how often those conditions are changing, that operational flexibility matters because the approach also brings legal, operations, trustee, and custodian teams into the conversation earlier.
The evolution in governance isn’t just procedural as it has competitive implications, added Pries. In a market where insurer capacity is limited and timing is sensitive, speed and certainty can determine whether a transaction happens at all. After all, insurers have finite capital and bandwidth, so plans that show up prepared have an advantage over those that are still scrambling to get organized, she said.
