Pension risk transfer premiums continue to drop in March – Milliman

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

The estimated average premium among the most competitive rates was 99.3% as of March 31, down from 99.7% as of Feb. 28, according to a report about the Milliman Pension Buyout index. It was the third straight month that competitive PRT premiums were below 100%.

Also during March, the average annuity purchase cost across all insurers fell to 102.6% from 102.8% a month earlier.

"Despite the Federal Reserve raising interest rates by a quarter percentage point in March, accounting discount rates dropped and the competitive pension buyout costs remained under 100% for the third consecutive month," said Jake Pringle, a principal and consulting actuary with Milliman and co-author of the study, said in a news release Thursday. "We expect interest in PRT transactions to remain high, even as plan sponsors weigh the uncertainty of future Fed decisions."

Average accounting discount rates decreased by 33 basis points in March, and annuity purchase rates decreased by 28 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.