Median solvency hit 123% in March and the insurer says slower deal flow favours sponsors
Canadian defined benefit (DB) pension plans hold their strongest funded positions in nearly two decades, and Sun Life is pointing to that surplus as a reason for sponsors to weigh transferring pension risk before the year ends.
The numbers back that up.
According to Mercer's Pension Health Pulse, the median solvency ratio across Canadian DB plans reached 123 percent as of March 31, with 87 percent of plans clearing full solvency.
An earlier reading from the same tracker, published January 5, 2026, put 92 percent of plans in surplus and pegged the high at 132 percent as of December 31, 2025.
Mercer draws the Pulse from 471 client plans across the country.
On the deal side, Sun Life expects total pension risk transfer (PRT) volume in 2026 to land broadly in line with 2025, and below the record $11bn reached in 2024.
The insurer argues the slower pace works in sponsors' favour, saying lighter volumes tend to leave insurers more motivated to compete on price and more available to structure complex deals.
That is Sun Life's read on market dynamics rather than a settled fact.
Larger deals are driving much of the market's evolution.
Sun Life estimates eight jumbo transactions, each exceeding $800m in liabilities, have closed since the first in 2017.
The largest to date came from General Motors of Canada Company at $1.8bn, announced in 2021.
In 2024, jumbo deals made up roughly a third of market volume, about $3.6bn by Sun Life's estimate, including $1.5bn from IBM Canada, around $900m from Bombardier, and a $1.2bn inflation-linked transaction by an undisclosed organization.
Insurer capacity has grown alongside deal size.
"We estimate that the market would now be able to absorb transactions up to $4bn in size in a single day with the appropriate strategy and planning," WTW said.
Sun Life said it can transact $2bn or more in a single day and is working to raise that figure.
Pricing has also held up, according to Sun Life.
The insurer estimates annuity prices have improved relative to duration-matched corporate bonds since January 2020, and puts recent annuity yields in the range of roughly 4.7 to 4.9 percent, depending on duration and measurement date.
The core appeal of a group annuity, as Sun Life frames it, is the transfer of both investment and longevity risk.
The insurer estimates a one-year increase in members' life expectancy would add $30m to $40m to the liabilities of a $1bn plan under current conditions.
Sun Life also points to surplus mechanics.
In Ontario, plans generally must hold a 5 percent solvency buffer before taking contribution holidays, so shrinking a plan through an annuity purchase proportionally frees up that buffer.
Citing a white paper by Moody's, the insurer said funding margins and provisions for adverse deviation can leave residual liabilities lower after a transaction, though it noted the calculations are technical and depend on plan-specific factors.
