Bulk Annuity Buyouts – A look Behind The Curtain | Mercer

Bulk Annuity Buyouts – A look Behind The Curtain

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Bulk Annuity Buyouts – A look Behind the Curtain
Calendar01 September 2017

Defined Benefit plan sponsors face a delicate balance when determining if and when they transfer risk to an insurer through a bulk annuity purchase. A successful transaction aligns favorable economics, insurer interest and capacity, and a keen focus on participant security. Optimizing these three considerations is the key to striking the right balance for all parties involved.

In this article, we provide our insights on the factors driving today’s bulk annuity buyout market, the state of the insurance market for these transactions and the evolution of related fiduciary oversight.

Driving Factors in Today`s Annuity Buyout Market - Spotlight:

  • Increasing retention costs enhance buyout economics
  • The fallacy of “par” value
  • The true economics of small benefits and understanding the mortality trade
  • Buyout supply - flicker but evolving
  • Adapting the destination to insurer appetite
  • Execution timing and bird-in-the-hand incentives
  • Ensuring all plan participants are well secured with a seamless experience

Bulk Annuity Buyouts Managing Longevity Risk

With forethought and if executed in the right manner, bulk annuity buyouts are a very effective pension risk management tool. Sponsors have deployed a range of tools over the past decade to manage pension debt and risk, with bulk annuity buyouts emerging as the flavor of the day among industry participants.

Buyout supply is adapting to meet emerging demand in various ways that compel sponsors to stay close to the dynamic insurance market in considering any transaction.

To stay current on existing  trends, and market insights, download the full article, and learn more about successful transitions that align favorable economics, insurer interest and capacity, and a keen focus on participant security.

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