Market insight from year-end 2020 SFCRs: Sample of life insurers based in Luxembourg
Gross written premiums in our sample of Luxembourg-based life insurers decreased 20% in 2020.
As the Pension Risk Transfer market continues to grow, it has become increasingly important for plan sponsors to monitor the annuity buyout market when considering a plan termination or de-risking strategy. The timing of the annuity buyout can ultimately impact the cost, as well as the plan’s funding and accounting measurements. Other factors also impact annuity buyouts such as size, complexity, and competitive landscape, which should be taken into consideration with the estimated cost illustrated in the MPBI.
During June 2020, average accounting discount rates decreased by 11 bps while annuity purchase rates decreased by 18 bps. This caused the estimated retiree buyout cost as a percentage of accounting liability (accumulated benefit obligation) to increase by 70 bps, from 103.9% to 104.6%.
When considering these results, please keep the following information in mind:
The Milliman Pension Buyout Index (MPBI) uses the FTSE Above Median AA Curve and annuity purchase composite interest rates from several insurance companies to estimate the cost, as a percentage of accounting liability, of transferring retiree pension obligations to an insurer. To review previous monthly findings, visit milliman.com/en/periodicals/Milliman-Pension-Buyout-Index.