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Special Report: Will Pension Risk Transfers Someday Control All DB Plans?

Source: LIMRA International
Last December, General Electric transferred roughly $1.7 billion in pension obligations to Athene, involving 70,000 retirees. In January, Lockheed Martin announced plans to shed roughly $1.9 billion in liabilities after MetLife assumed payments for some 20,000 retirees and current employees. The previous year, the aerospace and defense giant moved $2.6 billion in pension liabilities, covering 41,000 workers, to Prudential Insurance and Athene.
Over the past six years, 10 more insurers have gotten into PRTs, for a total of 18. With added competition, the insurance companies have undertaken increasingly sophisticated methods, such as introducing reinsurance.
Why Some Sponsors Do It
Plan sponsors that undertake a PRT often characterize the offloading as a wise removal of a liability that can be a drain on company resources especially if another economic downturn blasts the pension programs’ portfolios, in an unwelcome reprise of 2008. T ....

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Special Report: How to Ensure a Smooth Pension Risk Transfer

Without thoughtful preparation, offloading liabilities can be a costly and time-consuming endeavor.

For employers, the number of reasons they should consider offloading some or all of their pension liabilities from their balance sheets seems to be growing every year. On average, beneficiaries are expected to live longer than they have in the past; generating returns to cover liabilities is becoming more challenging in a low interest rate environment; and premiums for the Pension Benefit Guaranty Corporation (PBGC) keep rising.
Already, many plan sponsors are expected to power through deals this year. After the pandemic dampened deal flow for the first part of last year, the market is expected to continue its “steady upward trend,” according to Willis Towers Watson. ....

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Special Report: The Risk Factor in Pension Transfers | Chief Investment Officer

Plans often do piecemeal deals, to reduce the chances of everything going down the tubes.
A corporate pension risk transfer (PRT) in an innately risky undertaking. First are the risks of sitting tight and not doing a PRT. Such as: Will low interest rates continue and make the effort to meet liabilities harder? What if the stock market craters and stays low for a prolonged period? Can a plan meet its obligations in coming decades if the number of beneficiaries is unclear?
But then there are the fresh risks of taking the leap and making a transfer. Like: Is bridging the gap to full funding, which an insurer requires to do a deal, too grave a sacrifice? Diverting precious company capital to boost the funding level could deprive the business of the fuel it needs to grow. ....

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