“As plan sponsors think about pension de-risking, what is the potential value of a series of buy-ins that will enable them to step out of their pension liabilities and achieve their long-term objective?” said Glenn O'Brien, managing director, U. S. Market Leader at Prudential. “As an insurer, we think a lot about risks and the risks that are rewarded and those that are not. The market turmoil in March and April this year bought home to a lot of people that we don't know enough about our underlying circumstances to meaningfully measure the risk. That’s been a long-term tenet of how we think about managing pension liabilities on behalf of all plan sponsors and participants,” said O’Brien, at Pensions & Investments’ Managing Pension Risk Strategies virtual series.
“Then, price is important. How do you evaluate the price of moving a set of pension liabilities?” he added, at the workshop titled ‘Getting out with a buy-in.’ “Obviously, you would want to do that in the context of the cost to own that set of pension liabilities. There are the hard costs of waiting to move the pension liabilities, whether it's PBGC premiums and asset management fees, but credit migration and credit defaults can also be significant holding costs,” he said. “Finally, what's the reward for taking risk away from the balance sheet? We hear from sponsors that running a set of pension liabilities is just not their core business, which is really to focus on delivering value to their customers.”