Current market volatility creates pricing opportunities for well-prepared schemes

In amongst all of the uncertainty created due to COVID-19, widening credit spreads have created pockets of attractive buy-in pricing. The situation will vary between insurers, depending on their views on the risks presented by different investment opportunities and market volatility. This means some of these opportunities may be fairly short term. For schemes to take advantage of dips in pricing they will need to have spent the time preparing, have engaged with insurers and be in a position to make decisions quickly. See our “Buy-in insights” section for more details on the implications of COVID-19 on buy-in/out pricing and insurer capacity.

Too soon to estimate the longevity impact of COVID-19 on pension schemes

There is considerable uncertainty over the extent to which COVID-19 will impact (both directly and indirectly) mortality rates and there is the potential for the impact to vary significantly between pension scheme populations. This creates a risk that pension schemes could “over-pay” for insurance at this point in time, compared to holding off until the passing of the initial wave of COVID-19. However, the price reductions created by widening credit spreads (discussed above) is offsetting and in may cases outweighing the regret risk of transacting in the midst of a mortality spike. This balance requires careful assessment.

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