Mercer Pension Risk ExchangeTM

A Ground Breaking Approach to Pension Risk Management

Many defined benefit plans are now closed to new employees, but these plans still represent significant obligations for the company to manage alongside its on-going business. In addition to the company specific situation, economic factors are also driving up the demand for annuity transactions; however, the annuity marketplace can be hampered by long execution timelines and lack of price transparency. A plan sponsor requires robust information on the financial position of the company’s pension plan, needs an understanding for how key financial metrics are developing over time, and values customized pricing information. This information must be accurate, up-to-date, and easily accessible.

Current Bulk Annuity Market Challenges


  • UNPREDICTABLE MARKET

    Each deal is unique and attracts different insurers. Deal pricing can vary dramatically.

     

  • PRICE VOLATILITY

    Pricing fluctuates over time but is not visible to plan sponsors.

     

  • LACK OF PRICING TRANSPARENCY

    Obtaining a price can be difficult and time consuming. Plan sponsors often don’t know the price at which they should execute an annuity transaction.

     

Mercer Pension Risk Exchange TM


Mercer Pension Risk Exchange TM


  • READINESSS

    Mercer’s systematic and disciplined approach finalizes all data and documents well in advance of the transaction, enabling swift execution. We advise on target price levels and plan metrics that should be monitored, and we establish triggers upon which to act.

     

  • DYNAMIC MONITORING

    Our pricing platform allows insurers to submit regular bids for specific plans. This enables sponsors to continuously monitor their unique price and specific plan metrics and to execute when market conditions are optimal.

     

  • EXECUTION SUPPORT

    Provides fiduciary training and insurer due diligence to support the final auction, insurer selection, and transition of responsibilities to the insurer, all while enhancing participant security.

     

Mercer Pension Risk Exchange Process


Mercer Pension Risk Exchange TM Supports You Through Each Step of the Annuity Placement Process

There are four components of the process. We work with clients to understand the services that are most applicable to their current situation, and timeline to execute a transaction. Our approach provides increasing financial certainty as a client moves through the purchase process.

Explore: Understand market appetite and competitiveness; Assess trends over time; Determine timing/strategy to proceed with a transaction

Discover: Prepare insurer RFP and plan data; Gather preliminary annuity quotes from insurers; Establish financial metrics to monitor; Start fiduciary education

Monitor: Monitor annuity pricing against financial metrics; Complete fiduciary education; and insurer due diligence

Execute: Hold final placement auction; Select insurer and transfer premium; Commence post deal transition

Timeline


Mercer Pension Risk Exchange reduces the time to transact by bringing forward: 1) data preparation; 2) agreement of optimal financial targets; and 3) approvals and sign-off.

    TRADITIONAL APPROACH

  • Plan sponsor agrees to annuity buyout, but unclear of “right price” 
  • Data clean up exercise
  • Insurer RFP and data shared with insurers
  • Initial prices received: unclear if “right price” so process stalls
  • Price updates received, client becomes comfortable with pricing
  • Final placement held
  • Deal executed.
  

    MERCER PENSION RISK EXCHANGE APPROACH

  • Plan sponsor agrees to assess annuity pricing and proceed if financial targets met
  • RFP and data shared with insurers on the Exchange

Price updates received, financial metrics updated

  • Initial prices received
  • Financial triggers hit

Pricing Opportunity Missed by Traditional Approach

  • Final placement held
  • Deal executed

 

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