August 2023
21Aug

US. Pension Risk Transfer Deals Hit Record Level in First Half of 2023

In the first half of 2023 plan sponsors completed a record 289 pension-risk transfer transactions totaling $22.4 billion in premiums, according to a report from Aon, the largest PRT adviser. Aon predicted that the full year would see $40 billion in PRT deals, noting that the PRT market typically is busiest in a year’s second half. The report declared: “The pipeline continues to be robust, and we are hearing a lot of interest from plan sponsors. We expect a busy second half...

August 21, 2023
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18Aug

Public Employee Pensions and Municipal Insolvency

By Sean Myers  This paper studies how municipal governments jointly manage spending, credit market borrowing, and public employee pensions. I model governments as levered investors who must meet non-defaultable pension obligations and may value government spending more than citizens. I quantify the model using California city-level data, including a new record of fiscal emergencies, tax increases required to maintain essential services. After the financial crisis depleted pension funds, cities engaged in excessive risk-taking: the fiscal emergency option encouraged gambling for...

August 18, 2023
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July 2023
19Jul

US. ERISA Advisory Council Highlights Trends in Pension Risk Transfers

Shaun O’Brien, the chair of the ERISA Advisory Council, summarized many of the trends in the pension risk transfer market and commonly expressed concerns from pension fiduciaries and stakeholders at a hearing the council hosted Tuesday at the Department of Labor. The hearing was held to discuss possible changes to Interpretative Bulletin 95-1, which requires that pension fiduciaries select the safest annuity providers when executing pension risk transfers. Considering modifications to IB 95-1 was required by Section 321 of the...

July 19, 2023
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13Jul

China’s $400 Billion Pension Sends New Warning on Debt Risks

One of China’s biggest state-run investors is adding to the chorus of warnings over debt risks at the nation’s cash-strapped developers and local government financing vehicles. The National Council for Social Security Fund, which oversees about $417 billion according to the latest available figures, has advised asset managers that handle its money to sell some bonds including those from riskier LGFVs and private developers after a review, people familiar with the matter said, asking not to be identified discussing private...

July 13, 2023
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June 2023
26Jun

EIOPA says national supervisors need more data on liquidity risks

Pension funds and insurers in Europe are holding up well in spite of higher financial stability risks, according to a new report from the European Insurance and Occupational Pensions Authority (EIOPA) – but the body also said national supervisors need more data on liquidity and other risks to make sure buffer requirements are adequate. Publishing its June 2023 Financial Stability Report today, Frankfurt-based EIOPA said the European economy was currently experiencing a new period of high uncertainty and elevated financial...

June 26, 2023
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23Jun

Milliman analysis: Competitive pension risk transfer costs increase from 98.3% to 100.5% in May

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 increased from 98.3% of a plan's accounting liabilities...

June 23, 2023
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21Jun

Zurich & Prudential Financial in £1.7bn UK pension longevity swap & reinsurance

The Nationwide Pension Fund Trustee Limited has entered into a longevity swap agreement with Zurich Assurance Ltd (Zurich UK), and Prudential Financial, Inc. (PFI) of the United States has acted as the reinsurance capital provider. The longevity risk of approximately £1.7 billion ($2 billion) of Nationwide’s pension scheme liabilities, covering approximately 7,000 in-pay members in the UK, are involved. The transaction sees the longevity risk of the pension passing through Zurich UK, to an insurance subsidiary of PFI as the reinsurance...

June 21, 2023
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20Jun

Ghana’s pensions authority seeks support from development partners — As SECO project comes to an end

The National Pensions and Regulatory Authority (NPRA) is asking for support from the World Bank and other development partners for continuous technical training for the effective operationalisation of its Risk Based Supervision (RBS) System. The RBS systems which was developed in 2019 through the help of the Swiss State Secretariat of Economic Affairs (SECO) is aimed at streamlining the supervisory and regulatory mandate of the authority. It was also designed to help the authority to stay abreast with the emerging pensions...

June 20, 2023
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19Jun

US. Teacher pensions systems are increasingly underfunded, making teachers vulnerable and salaries less attractive

By Andrew G. Biggs Pensions are an important component of total compensation for most employees but particularly for public school teachers. Teachers tend to have relatively low salaries but retirement benefits that are considerably more generous than in a typical private-sector 401(k) plan. Yet the risk facing teachers is that many teacher pension plans are significantly underfunded, placing their employers under considerable financial strain, and reducing resources available for schools and for teacher pay and benefits. The funding shortfalls facing...

June 19, 2023
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16Jun

UK. BOE Issues Fresh Warning Over Risks in Pension Transfers

The Bank of England has warned firms offloading pensions in a multibillion-pound market that they need to improve the way they manage reinsurance risks. The Prudential Regulation Authority, part of the BOE, wrote to life insurers on Thursday to highlight its concerns about the use of “funded reinsurance,” where insurers pay upfront to transfer the risk of pensioners living longer to another firm. If one of the major reinsurers were to fail, the original insurer could be exposed to “sub-optimal portfolios”...

June 16, 2023
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