Author: Greg Winterton

The UK pension scheme risk settlement market is likely to be boosted in the second half of 2024, following publication of insurers’ latest annual returns that confirm solvency levels remain strong and with ample headroom to support significant new business volumes, according to professional services firm Aon.  Publication of insurers’ latest annual returns demonstrates that most insurers are reporting slightly lower solvency coverage at year-end 2023 compared to the previous year.   This largely reflects some return to normality following unusually high positions, in particular driven by favourable market conditions towards the end of 2022. While 2023 saw some capital strain…

Actuarial and consulting firm Milliman’s latest Milliman Pension Buyout Index (MPBI) shows the estimated cost to transfer retiree pension risk to an insurer in a competitive bidding process decreased slightly, from 100.9% of a plan’s accounting liabilities (accumulated benefit obligation, or ABO) to 100.7% of those liabilities. That means the estimated retiree PRT cost is now 100.7% of a plan’s ABO. During the same time period, the average annuity purchase cost across all insurers in our index also decreased, from 103.3% to 103.2%. The competitive bidding process is estimated to save plan sponsors about 2.5% of PRT costs as of…

The life settlement industry’s secondary market has grown for the third consecutive year, according to The Deal’s life settlements league tables, published in early June.  The Deal collects transaction data by licensed life settlement providers via public records requests to state insurance departments. Providers are a mandatory participant in the life settlement market, so the data has become something of an annual bellwether for the health of the market overall.  This year, the two main points are that the number of transactions completed in the secondary market is up for the third consecutive year, and the aggregate face value of…

In mid-May, Connecticut Insurance Commissioner Andrew N. Mais filed a ‘Petition for Rehabilitation and Appointment of the Commissioner as Rehabilitator of PHL Variable Insurance Company (PHL)’ and its subsidiaries, Concord Re, Inc. and Palisado Re, Inc., in the Connecticut Superior Court.  “Today’s filing underscores the Department’s commitment to protecting consumers and ensuring the availability of a financially sound insurance industry in Connecticut,” said Commissioner Mais in a press release.   “This action is a critical first step for the Department to begin developing and implementing a plan of rehabilitation that both maximizes the value of the Companies’ assets and equitably administers…

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…