Pension risk transfer premiums fall below 100% in January – Milliman

U.S. pension risk transfer premiums among the most competitive bidding processes dropped below 100% in January, a study by actuarial and consulting firm Milliman showed.

According to a report about the Milliman Pension Buyout index, the estimated average premium among the most competitive rates was 99.3% as of Jan. 31, down from 100.2% as of Dec. 31.

It is the first time since August the estimated average premium fell below 100%. That estimated average premium was 96.9% as of Aug. 31.

Also during January, the average annuity purchase cost across all insurers remained at 102.5%.

Mary Leong, a principal and consulting actuary with Milliman and co-author of the study, said in a news release that with the addition of American National Insurance Co. to the U.S. pension risk transfer market in December, pricing should stay low.

"Given the continued growth of the PRT market, and the interest in derisking as interest rates continue to climb, we expect pricing to remain competitive in 2023," Ms. Leong said.

Average accounting discount rates decreased by 37 basis points in January, and annuity purchase rates decreased by 25 basis points for the most competitive rates, according to Milliman.

The Milliman Pension Buyout index uses the FTSE Above Median AA Curve and insurers' composite interest rates to estimate the average cost of pension risk transfer transactions.