Given today’s tumultuous market environment, with its historically low Treasury rates and volatile credit and equity markets, plan sponsors may be hesitant to move forward with pension risk transfer transactions.
However, while it may seem counterintuitive, this environment may in fact result in insurer pricing that is more attractive than a more normal market, relative to the liability held on a plan sponsor’s balance sheet. Anecdotally, Athene estimates that during the last two weeks of March 2020 a retiree transaction may have been priced below the projected benefit obligation for an indicative retiree population by as much as 5 percent.
In this paper, we’ll demonstrate how ongoing monitoring and analysis of the pricing environment may result in even more value during this period of market volatility than during periods of relative stability. Now more than ever, we recommend that plan sponsors who decide to move forward with pension risk transfer exercises consider incorporating price monitoring into the transaction process.