U.S. pension risk transfer premiums among the most competitive bidding processes rose slightly in January, a study by actuarial and consulting firm Milliman showed.
The estimated average premium among the most competitive rates was 101.8% as of Jan. 31, up from 100.5% a month earlier, according to a report about the Milliman Pension Buyout index.
Also during January, the average annuity purchase cost across all insurers increased to 103.6% from 103.1% at the end of December.
"Retiree buyout costs crept up at the start of the year as accounting discount rates rose but PRT rates fell," said Jake Pringle, a principal and consulting actuary with Milliman and co-author of the study, in a Feb. 23 news release. "It will be interesting to see the Fed's (Federal Reserve's) response to high inflation reports and if that will impact the PRT market."
Average accounting discount rates increased by 11 basis points in December, and annuity purchase rates dropped by 6 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.
