Article October 15, 2020

Pension plan annuity purchase update – Q2 2020

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Market activity

Group annuity risk transfer sales ($ millions)

What we're seeing

Some clients that delayed buyouts due to COVID-19 related shutdowns earlier in the year are now completing their buyouts in Q3 and Q4, as they have adapted to remote working conditions. Second half sales will likely be more in line with recent years and should easily exceed the total of the first half of 2020. Pricing continues to remain very competitive. For retiree only cases, pricing continues to average about 99% of the accounting liability[1], while plan termination cases average about 100%[2].

What we're hearing

Despite the economic decline and remote working conditions due to COVID-19, insurers continue to maintain a business-as-usual status with regard to pension risk transfer and still have a strong appetite for new business. In addition, another new insurer has entered the market this fall, which further increases competition and brings the total number of insurers in the marketplace to 18.

 

[1] Measured using FTSE curve and best estimate of underlying mortality.

[2] Based on plan demographics and the mix of deferred and in-pay annuities.

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