The Game of Pension Risk Transfers Continues
fsi Many employers with defined benefit pension plans would love to put responsibility for the plans in the hands of a life insurer, by buying a large group annuity contract.
Predictions about how the current COVID-19, stock price and interest rate turmoil will affect the market for pension risk transfer annuities are… highly diverse.
The life insurers in the market say demand is strong. Analysts at Moody’s Investors Service say big pension risk transfer units could help buffer some life insurers against the effects of COVID-19 mortality.
The authors of a Society of Actuaries research brief on the effects of the COVID-19 pandemic suggest that low interest rates, greater economic uncertainty, and concerns about life insurer stability could hurt pension risk transfer sales.
In theory, COVID-19 deaths could help improve life insurers’ individual annuity business profitability, by reducing the longevity of some annuity holders. In reality, however, many individual annuities offer the annuity holder’s own beneficiaries guaranteed death benefits, and that reduces that savings the issuer gets when the annuity holder dies.
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