US. Milliman: Pension risk transfer premiums increase slightly in June
Estimated average pension risk transfer premiums rose slightly in June, but the average rate among the most competitive bidding processes fell by 30 basis points, a study by Milliman showed.
The estimated buyout cost as a percentage of accounting liabilities, or accumulated benefit obligations, was 103% as of June 30, up from 102.5% as of May 1, according to the Milliman Pension Buyout index.
However, the average of the most competitive annuity purchase rates fell by 30 basis points to 98.3% from 98.6% a month earlier.
Mary Leong, a consulting actuary with Milliman and co-author of the study, said in a news release Monday that insurers have kept their premiums low despite rising interest rates.
“Competitive buyout rates have stayed below 100% for nine months, signaling that this may be the ‘new normal’ in a competitive bidding process,” Ms. Leong said. “With the 200-basis-point jump in rates during the first half of 2022, we suspected the index might rise; but insurers kept up, raising their interest rates at the same pace.”
Average accounting discount rates during the month of June increased by 28 basis points from the previous month, while annuity purchase rates increased by 32 basis points for the most competitive rates, according to the study.
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