A new paper from Hymans Robertson, a leading pensions and financial services consultancy, advises trustees of defined benefit (DB) pension schemes to look beyond price when selecting an insurer for buy-in or buy-out transactions.
While cost remains a critical factor as schemes approach buy-out and wind-up, the report highlights the importance of considering non-price factors such as administrative capabilities, operational resilience, and the insurer’s approach to environmental, social, and governance (ESG) issues.
Hymans Robertson outlines several key areas for trustees to assess when evaluating these non-price considerations.
These include the insurer’s ability to provide robust administration, manage data cleansing processes effectively, and meet agreed timelines while remaining adaptable.
Ensuring a smooth experience for scheme members and verifying that the insurer has strong security measures, such as cyber security and risk management frameworks, are also essential.
The consultancy emphasises the growing significance of ESG factors in the selection process. Insurers must demonstrate that their ESG commitments extend beyond surface-level compliance and reflect genuine efforts to uphold sustainability, social responsibility, and good governance.
Hymans Robertson’s insights provide DB trustees with a comprehensive framework for assessing insurers holistically, ensuring decisions account for both cost efficiency and broader operational and ethical standards.
Paula Haughton, Senior Actuarial Consultant at Hymans Robertson said: “As DB schemes continue to head towards buy-out, factors other than price are becoming increasingly important to their trustees. Administration is high on the list of concerns. The insurer’s financial strength, how it manages risks stemming from its operations, investments, and use of funded reinsurance also form part of discussions.
“Choosing the right insurer is not a straightforward decision and encompasses a wide range of factors all very much dependent on the scheme’s circumstances, timescales and budgets. Having clear upfront discussions about what is important prior to insurer selection is vital to ensure a good match is made.
“It helps with productive discussions and builds confidence that the journey after buy-in will be smooth and efficient, with members getting a good experience.The balance between price and other factors is a delicate one, but walking this fine line can only bring confidence to the buy-out experience.
“DB Trustees have several tools they can use to assess insurers on their administration capabilities. Advisers can assess insurers’ administration capability and relay their own experience.”
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