The increase in pension risk transfer activity leads to an increase in the pricing rate, to 102.7% in September

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Competitive estimated cost of transferring pension risk from retirees drops from 100.1% to 100.2%

Posted: October 22, 2021 at 10:04 a.m. EDT|Update: 1 hour ago

SEATTLE, 22 October 2021 / PRNewswire / – Milliman, Inc., a leading global actuarial and consulting firm, today announced the latest results of its Milliman Pension Buyout (MPBI) Index. As the retirement risk transfer (PRT) market continues to grow, it has become increasingly important to monitor the annuity market for plan sponsors who are considering transferring pension obligations from retirees to an insurer.

With this increased activity on the horizon, insurers are more selective and less competitive.

In September, the estimated average cost of transferring pension risk from retirees to an insurer fell from 102.2% of a plan’s total liabilities to 102.7% of these liabilities. This means that the estimated average ERP cost for retirees for the month is now 2.7% greater than the accrued benefit obligation (ABO) of retirees of these plans. Meanwhile, the cost of purchasing annuities reflecting competition among insurers rose only slightly, from 100.1% to 100.2% in September.

“This month is a good example of how changes in insurer demand for retirement risk transfers can affect buyout prices,” says Marie Leong, consulting actuary with Milliman and co-author of the study. “Many insurers closed a number of deals in the third quarter and expect high volume in the fourth quarter. With this increase in activity on the horizon, insurers are more selective and less competitive. This probably explains why the rise of our index this month. “

The MPBI uses the FTSE curve above the AA median, along with the composite annuity purchase interest rates of eight insurers, to estimate the average and competitive costs of a PRT annuity risk reduction strategy. Individual plan annuity buybacks may vary depending on plan size, complexity and competitive landscape.

To view the full Milliman Retirement Buyback Index, go to https://www.milliman.com/mpbi.

About Milliman
Milliman is one of the world’s largest providers of actuarial and related products and services. The firm has consulting practices in the areas of health, property and casualty insurance, life insurance and financial services, and employee benefits. Founded in 1947, Milliman is an independent firm with offices in major cities around the world. For more information, visit milliman.com.

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SOURCE Milliman, Inc.

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