Toronto-based Sun Life Assurance Co. of Canada on Tuesday announced what it says is the largest annuity buy-in deal in Canadian history.<\/p>\n

The insurer has entered into an annuity buy-in transaction, valued at approximately $530 million, with two unnamed Canadian pension plan sponsors, according to the firm’s announcement.<\/p>\n

Under the deal, the pension plans pay a lump sum premium to the insurer and Sun Life will make monthly payments to the plans, which will then pay their plan members’ defined benefit pensions directly.<\/p>\n

The deal effectively transfers the plans’ investment, longevity and inflation risk to Sun Life, while securing their ability to continue to deliver pension payouts to their plan members.<\/p>\n

Sun Life developed the idea for the massive annuity after receiving inquiries from two unrelated inflation-linked pension plans, the announcement says. The insurer combined the annuity purchases for the two plans, which enabled Sun Life to pool the inflation risk and create a more efficient strategy; which, in turn, “generated significant cost savings” for the plans, the announcement says.<\/p>\n

“We are thrilled to be transforming the annuity market, creating an innovative solution to help inflation-linked pension plans reduce risk,” says Brent Simmons, senior managing director, defined benefit solutions, at Sun Life Financial, in a statement. “This transaction is in response to market demand for affordable solutions for inflation-linked plans. 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.”<\/p>\n

This sort of combined annuity is appropriate for plans “with indexing formulas that are related to inflation but are different enough to be complementary.” the Sun Life announcement says.<\/p>\n","protected":false},"excerpt":{"rendered":"

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