U.S. pension risk transfer premiums among the most competitive bidding processes jumped more than 300 basis points in September to land above 100%, a study by Milliman showed.
According to a report of the Milliman Pension Buyout index, the estimated average premium among the most competitive rates was 100.1% as of Sept. 30, up from 96.9% as of Aug. 31.
Also, the average annuity purchase cost across all insurers increased to 103.1% at the end of September from 101.4% a month earlier.
"With the competitive retiree buyout cost back up to 100%, the big question is what may have triggered this uptick," Mary Leong, a principal and consulting actuary with Milliman and co-author of the study, said in a news release on Wednesday. "Potential factors include insurers having less appetite for interest rate risk, or less assets available for transactions as we head into Q4. It will be interesting to see if this trend continues through year-end or if the buyout cost reverses direction again."
Average accounting discount rates increased by 80 basis points during September, while annuity purchase rates increased by 39 basis points for the most competitive rates, according to the report.
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.
