Milliman analysis: Competitive pension risk transfer costs inches down in May, from 100.9% to 100.7%
June 18 2024 - 10:59AM
Business Wire
Competitive bidding process saves about 2.5%
of buyout costs as of May 31
Milliman, Inc., a premier global consulting and actuarial firm,
today announced the latest results of its Milliman Pension Buyout
Index (MPBI). As the pension risk transfer (PRT) market continues
to grow, it has become increasingly important to monitor the
annuity market for plan sponsors that are considering transferring
retiree pension obligations to an insurer.
During May, the estimated cost to transfer retiree pension risk
to an insurer in a competitive bidding process decreased slightly,
from 100.9% of a plan’s accounting liabilities (accumulated benefit
obligation, or ABO) to 100.7% of those liabilities. That means the
estimated retiree PRT cost is now 100.7% of a plan’s ABO. During
the same time period, the average annuity purchase cost across all
insurers in our index also decreased, from 103.3% to 103.2%. The
competitive bidding process is estimated to save plan sponsors
about 2.5% of PRT costs as of May 31.
“Plan sponsors kept insurers busy setting a new first quarter
record with $14.6 Billion in PRT premiums and 146 contracts,” said
Jake Pringle, a Milliman principal and co-author of the MPBI. “With
competitive buyout costs remaining relatively stable over the past
few months and coming in at 100.7% for May, it will be interesting
to see where second quarter numbers land.”
The MPBI uses the FTSE Above Median AA Curve, along with annuity
purchase composite interest rates from nine insurers, to estimate
the competitive and average costs of a PRT annuity de-risking
strategy. Individual plan annuity buyouts can vary based on plan
size, complexity, and competitive landscape.
To view the complete Milliman Pension Buyout Index, go to
https://www.milliman.com/mpbi. To receive regular updates with
Milliman’s pension buyout analysis, contact us at
pensionbuyout@milliman.com.
About Milliman
Milliman is among the world’s largest providers of actuarial,
risk management, and technology solutions. Our consulting and
advanced analytics capabilities encompass healthcare, property
& 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 globe. Visit us at
Milliman.com.
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Jake Pringle Milliman, Inc. Tel: +1 713 202 0819
jake.pringle@milliman.com