U.S. pension risk transfer premiums among the most competitive bidding processes rose slightly in July to remain above 100%, a study by actuarial and consulting firm Milliman showed.
The estimated average premium among the most competitive rates was 100.2% as of July 31, up from 100.1% as of June 30, according to a report about the Milliman Pension Buyout index.
Also during July, the average annuity purchase cost across all insurers increased to 102.9% from 102.7% a month earlier.
"In July, the Fed raised interest rates to the highest level in over 20 years and the competitive annuity index kept pace, staying right around 100% of accounting liabilities," said Jake Pringle, a principal and consulting actuary with Milliman and co-author of the study, said in a news release Monday. "With the considerable volume of PRT transactions in 2023, insurers could be close to hitting capacity as we finish up Q3. We will continue to monitor these trends as we move in to the final quarter of the year."
Average accounting discount rates decreased by 4 basis points in July, and annuity purchase rates increased by 3 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.