Author: Greg Winterton

The remarkable growth in the pension risk transfer market in the past few years has caught the eye of the trade media, investors – and regulators. But the transferring of longevity risk from pension funds was discussed long before it became a ‘thing’. Greg Winterton spoke to John Kiff, formerly of the International Monetary Fund, and now an independent consultant, to get his views on how the industry has evolved since he first started discussing it in the mid-2000s.  GW: John, you were discussing the longevity risk transfer market back in 2006 when you worked at the IMF. Go back…

The rising interest rate environment of the past two and a half years has had the impact of reining in deal activity in some life ILS trades, such as commission financing or value-in-force (VIF) deals, because rising rates make these transactions more expensive for life insurers, thus dampening demand, as well as being challenged by rate-driven lapsation.  That is not the case in the asset-intensive corner of the life ILS market, however. These deals – whereby the investor(s) assume both the liability and asset risk associated with a block of insurance-linked policies, like annuities, for example – benefit from a…

3M has purchased a group annuity contract from Met Tower Life and will transfer a portion of its US pension payment obligations under the 3M Employee Retirement Income Plan (ERIP) Met Tower Life.   Under the contract, 3M will transfer approximately $2.5bn of its defined benefit pension obligations and related plan assets for approximately 23,000 US retirees and beneficiaries to Met Tower Life, representing approximately 60% of ERIP retiree participants. The contract was purchased using assets from 3M’s ERIP trust and no additional funding contribution was required as part of this transaction, according to the firm.  Met Tower Life will begin…

Rothesay has completed a £125m full scheme buy-in with the MPS Pension Scheme.  The scheme is sponsored by The Medical Protection Society Limited, a member-owned, not-for-profit protection organisation for doctors, dentists and healthcare professionals.  The buy-in secures the benefits of all 618 Scheme members comprising 174 pensioners and dependants, and 444 deferred members. This was the scheme’s first transaction and no contribution from the company was needed, as the scheme was in surplus.  “We are pleased to secure the future for the schemes’ over 600 members. In a very buoyant market, this was a well-prepared scheme which supported the quick…

The outlook on the UK life insurance market is ‘staying stable’, according to credit rating agency AM Best in a new report.   In “Market Segment Outlook: United Kingdom Life Insurance”, AM Best cites a number of factors supporting its stable outlook, including a strong pipeline for pension risk transfers, as higher interest rates have improved the funding ratio of defined benefit schemes.  The report also suggests the improved interest rate environment will likely support investment yields. At the same time, investment opportunities are likely to broaden after prudential regulatory changes, notably the revision of the matching adjustment framework.  A factor…

Consulting and actuarial firm Milliman has released the results of its latest Milliman 100 Pension Funding Index (PFI), which analyses the 100 largest US corporate pension plans.  During May, the Milliman 100 PFI funded ratio rose from 103.1% at the end of April to 103.4% as of 31st May, driven by investment returns of 2.29%, the best-performing month of 2024. These gains lifted the net market value of PFI plan assets by $22bn for the month, to $1.296trn. They helped offset the decline in discount rates, which fell in May by 15 basis points, to 5.53%, and caused plan liabilities…

US life insurance application activity was flat in May 2024 compared to May 2023, with Year-over-Year (YOY) activity at -0.6%, according to the latest MIB Life Index.  Notable this month is that when examining YOY activity for May 2024 by face amount, there was double-digit YOY growth for amounts over $500k, and flat activity for amounts up to and including $500k.  May 2024 saw double-digit YOY growth in activity for Whole Life (up +12.5%), declines for Term Life (-1.9%) and double-digit declines for Universal Life (down -20.8%).  Universal Life, the type of policy most commonly seen in the life settlement…

The results of a recent survey of 152 defined benefit pension schemes in the UK by professional services firm Aon indicates that a majority of schemes now have a professional trustee on their board.   In the survey, Aon found that 57 per cent of respondents reported that they had appointed a professional trustee already. Aon expects this proportion will continue to rise in the future.  “A professional trustee won’t be appropriate for all schemes – many of which will already have highly experienced trustees on the board – but with the increased focus from employers on endgame planning, we expect…

The life settlement industry enjoyed its third consecutive year of growth in the number of transactions completed in the secondary market, according to new data from trade publication The Life Settlement Report, part of The Deal. The data collected by The Life Settlements Report comes mainly from state insurance departments through public records requests. For the calendar year 2023, the total face value of all transactions was $4.72bn, which is the highest recorded level since 2009. Furthermore, 3,181 deals were completed in the industry, the third consecutive year of growth and the second highest in the past five years (3,241…

The Bank of England’s Prudential Regulation Authority (PRA) has finalised its changes to the Solvency II regulation.  Policy Statement 10/24, issued yesterday, revolves around the changes to the matching adjustment (MA) component of the regulation; these changes broaden the assets that qualify for inclusion in MA portfolios.   The UK government is looking to direct capital into productive assets, and it will hope that the new regulations encourage insurers to invest accordingly. It’s unlikely that this will be a quick win, however.  “Today’s announcement has confirmed that there will be increased flexibility in the type of assets that insurers can invest…