Oliver Wyman and Mercer, businesses of Marsh McLennan, has launched a new pension risk transfer (PRT) longevity model that will enable pension plan sponsors, direct insurers and reinsurers to better price and manage longevity risk.

Drawing on Mercer’s US longevity dataset of over one million pension lives, the model leverages the combined actuarial strength and longevity expertise of Oliver Wyman and Mercer.

It also incorporates socioeconomic and demographic factors to generate a granular view of longevity risk.

The underlying technology of the model has been designed to allow users to extract tailored insights and analytics. These will assist in enhancing the prediction, understanding, and effective management of longevity risk within a PRT transaction.

The PRT market is developing rapidly, seeing record growth in 2023 with over 800 deals worth $45 billion in premiums.

That trend has persisted into 2024, registering a 14% year-over-year transactional premium increase in the first half of the year.

Mercer’s research reveals that a significant number of plan sponsors are considering terminating their current plans within the next decade.

David Weinsier, Partner and Oliver Wyman Actuarial’s Global Life & Health Leader, said: “Insurer participation in the PRT market has doubled over the past decade and continues to grow rapidly, with 21 insurers currently offering group annuity products designed for Defined Benefit (DB) plan buyout transactions.

“This tool will allow our clients to better price and manage longevity risk in an innovative and customizable manner.”

Scott Jarboe, a Partner and Mercer’s US Defined Benefit Segment Leader, added: “Many plan sponsors are driving towards terminating their DB plan, and, with more accurate data at their fingertips, they have more options that they can consider.

“Having a more comprehensive understanding of their plan’s longevity risk will make these transfers more attractive to insurers.”

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