MassMutual Publishes White Paper To Help Guide Employers About How To Successfully De-Risk And Transfer Pension Obligations
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The white paper, "Pension Risk Transfer: Insights from an institutional risk manager about how to successfully de-risk and transfer pension obligations," is designed to be a primer for evaluating pension risks and determining potential courses of action to manage those risks over time. The white paper was created by MassMutual's Institutional Solutions unit, which offers defined benefit pension management, pension risk transfer (PRT) solutions, and other institutional investment offerings.
"MassMutual's white paper is an in-depth view of how life insurers evaluate pension risks, especially in light of the growing demand for expertise in the pension risk transfer business," said
The PRT market has been growing steadily, especially in recent years as economic and regulatory factors have converged, prompting plan sponsors to reconsider their risk management strategies, according to McDonagh. MassMutual, a leader in the PRT marketplace, has seen a strong increase in customer demand as more sponsors conclude that the stewardship of pension obligations can be well-served by life insurers with deep resources and expertise to focus on the management of long-term risks, he said.
Single premium PRT product sales in
McDonagh attributed the rising sales of PRTs to a confluence of economic, regulatory and other factors, including a long bull market, which helped improve pension funding ratios3. The equity markets have prompted some pension sponsors to secure their gains and leverage improved pension funding ratios to explore the feasibility of removing pension liabilities from their balance sheets, he said.
Tax reform has also given PRT a boost as
The federal government is also passing on higher costs for backstopping pensions to employers, providing further motivation for employers to consider PRT, according to McDonagh. Premiums for the
With the current climate for PRT, MassMutual's white paper discusses both short- and long-term risks to pensions, evaluates specific risks such as longer lifespans for both workers and retirees, examines complications from pension benefit options, weighs "carve-outs" of pension participants, reviews considerations for pension assets and how they are invested, and suggests how sponsors should evaluate pension managers.
"MassMutual is seeing increased sponsor interest in PRT and other risk mitigation strategies to help plan sponsors better manage their long-term risks," McDonagh said. "We hope our white paper will help employers better understand the risks associated with their pensions and better prepare them to discuss the prospect of executing a PRT or other risk mitigation strategies when they have discussions with consultants and financial advisors."
Keywords for this news article include: MassMutual, Investment and Finance.
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