Exchange garners over 100 clients globally as pension de-risking options expand
Milestone demonstrates demand for transparency and customization in the group annuity market
Mercer, a global consulting leader in advancing health, wealth and careers, and a wholly-owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), today announced that since the launch of the Mercer Pension Risk Exchange® in 2015, over 100 clients globally are using the platform with more than 60 in the United States, over 30 in the United Kingdom and 10 in Canada. Developed as a new approach to pension risk management, Mercer Pension Risk Exchange® is a first-of-its-kind online platform which looks to match supply and demand in the group annuity market by bringing together plan sponsors and insurers. Before the advent of the exchange, price volatility, a lack of transparency and the unique challenges of each transaction gave pause to many plan sponsors regarding the decision to transfer their pension obligations.
“The robust demand for buyouts in the United States this year has exceeded our expectations. In spite of the prolonged low interest rate environment, we are seeing many companies looking to transfer pension risk.” said Lynn Esenwine, Partner, Mercer. “As plan sponsors see they can execute buyouts in a shorter timeframe and in a more competitive pricing environment via Mercer’s Pension Risk Exchange®, more transactions are taking place as a result.”
Since the launch of the Mercer Pension Risk Exchange®, Mercer has found:
- Volatile financial markets create windows of opportunity: As an example, a UK-based plan sponsor was offered a 10% discount by a larger insurer if the sponsor could transact within two weeks.
- Foreign currency exchanges hold impact on pension risk and buyouts: The case for buyout of UK pension schemes linked to subsidiaries of US parent companies is now stronger than at any stage in the past few years.
- A higher volume of smaller pension deals are coming to market: an increasingly competitive insurance market has proved to be a catalyst for smaller deals coming to market in the US.
- Pension risk transfer interest varies by geography: The current market for pension risk transfer is slower than recent years in UK and Canada, but insurer capacity is unchanged leading to strong insurer appetite and greater competition for deals.
“As well as clients seeing shorter time frames to complete transactions, and achieving more competitive pricing, they are also saving PBGC premiums and administrative costs; all with the benefit of participants’ annuities being secured by highly rated insurance companies.” said Ms. Esenwine. “The Mercer Pension Risk Exchange® platform has helped us to engage new insurance entrants and facilitate alternative deal structures like multi-insurer arrangements. With more plan sponsors seeking pension risk transfers and the nature of the current market, we expect the Mercer Pension Risk Exchange® platform to continue its current momentum.”
The Mercer Pension Risk Exchange® launched in the United States market in June 2015, the United Kingdom in October 2015 and Canada in January 2016. Clients have benefited from one of the key features of the Mercer Pension Risk Exchange®: opportunism in a dynamic market. Through close monitoring of a client’s plan funded status, insurer pricing, and broader market conditions, plan sponsors utilizing the Mercer Pension Risk Exchange® are better equipped to take advantage of market opportunities. In addition, pension risk is managed by a holistic approach: Mercer clients benefit from the transparency and speed-to-market by the Mercer Pension Risk Exchange®. In addition, Mercer can act as lead strategic advisor for transactions, which has led clients through a highly coordinated process of asset and liability management from strategy through execution.
More information about the Mercer Pension Risk Exchange® can be found here:
Mercer is a global consulting leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and careers of their most vital asset – their people. Mercer’s more than 20,000 employees are based in 43 countries and the firm operates in over 140 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global professional services firm offering clients advice and solutions in the areas of risk, strategy and people. With annual revenue of $13 billion and 60,000 colleagues worldwide, Marsh & McLennan Companies is also the parent company of Marsh, a leader in insurance broking and risk management; Guy Carpenter, a leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a leader in management consulting. For more information, visit www.mercer.com. Follow Mercer on Twitter @Mercer.
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