The medically underwritten bulk annuity market is likely to grow rapidly this year due to attractive pricing, with a particular interest in top slicing, according to the consultants.An “unprecedented” number of clients are investigating this market, they said.Top-slicing involves pension schemes purchasing a bulk annuity to cover those members with high liabilities, to remove concentrated longevity risk.Shelly Beard, senior de-risking consultant at WTW, said had been a wide range of transaction pricing in the bulk annuity market this year, which the consultants believe is in part because insurers are “price-testing” new positions under Solvency II.“However, general pricing levels remain strong, and the recent widening of corporate bond spreads has increased affordability for those schemes that have set a price target relative to Gilts,” she said.The consultants said there was a “high level of activity at what is normally a quiet time of year”, indicating a strong year ahead.Overall deal values for longevity hedging could reach £20bn in 2016, after £6bn in 2015 and £25bn in 2014, according to the WTW report.This would be the second-biggest year on record, after 2014, which included a record-breaking £16bn hedge for the BT Pension Scheme. This year could witness the first-ever “half-way house” transaction structures, involving top-slicing in the bulk annuity market and longevity swaps to cover the liabilities represented by the remaining population, according to WTW.This approach is likely to be attractive for those pension schemes “with some Gilts but not enough to annuitise all of their pensioner liabilities”, noted the report.Solvency II, the EU-wide solvency regulation for insurers that came into effect in January, could pose a challenge for pension schemes longevity hedging this year but is surmountable, according to the consultants.The problem, to the extent that it becomes one, stems from bulk annuity providers themselves looking to reinsure longevity risk more regularly because the capital-requirement rules of Solvency II makes holding the longevity risk on their books inefficient.This could mean pension schemes find it more difficult to get traction when reinsurers have limited resources, said the consultants.However, this potential capacity constraint in 2016 is likely to be operational and is one reinsurers are aware of and building their teams to cope with, Beard said.“While we may see bottlenecks in certain areas, we do not expect it to have a major impact on the market, and schemes that go to market with clear objectives will continue to achieve good outcomes,” she said.The onus, according to the report, is on pension schemes to have “a well-thought-out quotation process to maximise reinsurer engagement”. Longevity-hedging deals for company pension schemes could hit £20bn (€26bn) in 2016 despite challenges posed by Solvency II, according to a report by Willis Towers Watson (WTW).The consultancy predicted a 20% growth in bulk annuity deals in 2016, expecting buy-ins or buyouts covering some £12bn of liabilities versus the £10bn of liabilities transferred to insurers in 2015.Pensions schemes can expect lower prices and more innovation due to increased competition in the market, according to the advisory company’s 2016 de-risking report.Canada Life and Scottish Widows entered the market in the second half of 2015, noted WTW, and “we are aware of a number of other companies closely monitoring the development of the market” and likely to develop bulk annuity propositions over the course of 2016.
Military historian and author Victor Davis Hanson spoke at Town and Gown on Monday, charting the trend of the “savior general” throughout centuries of war, focusing on the case studies of Themistocles, Belisarius, William Tecumseh Sherman, Matthew Ridgway and David Petraeus. The lecture was followed by a Q&A session with philosophy professor Scott Soames.Heroes · Victor Davis Hanson spoke at Town and Gown Monday evening on the miltary generals who greatly affected war and history. – Benjamin Dunn | Daily TrojanHanson is the Martin and Illie Anderson Senior Fellow in Residence in Classics and Military History at the Hoover Institution, Stanford University. He has written 18 books, including his most recent, The Savior Generals: How Five Great Commanders Saved Wars That Were Lost — From Ancient Greece to Iraq.He outlined the careers and similarities between the generals who, through brilliant military strategy, rescued wars that would drastically change the Western world.“What if the war is lost?” Hanson said.He went on to reveal that the factors that traditionally won wars no longer matter. Hanson argued that manpower, technology, supply and morale become irrelevant when it is assumed that victory is out of reach. These men turned the tide of war through force of personality, intense study and a shared commonality with their troops, he said.“Nothing is lost, no war is lost until we say it’s lost,” Hanson said.Themistocles overcame the power of the vast Persian army at the Battle of Salamis, Belasarius re-established Byzantium under Justinian, Sherman rescued the Union and saved Lincoln’s presidency, Ridgway turned the tide of the Korean War and Gen. Petraeus outlined a new strategy for a failing conflict in Iraq that no one believed in.All the generals worked to remind the troops of their purpose, though each ended his life underappreciated and often vindicated by his country. Hanson suggested that these brilliant leaders are needed but do not work in peacetime.Hanson said he believes in the Thucydidean way of thought that says that human nature has remained the same through the ages so the study of the past is still relevant. He also introduced the modernist theory that through technology, humans have altered our brain chemistry so that history holds no value to study.President C. L. Max Nikias opened the lecture, and lauded Hanson for “shedding a spotlight on the vast expanse of human history.”“As a farmer and a classical scholar, Hanson studies how agriculture is connected to human conflict,” Nikias said.During the Question and Answer session, Hanson criticized the hypocrisy of the government in the Iraq war and also questioned U.S. morale.“It’s so hard to galvanize those absolute principles today,” he said. “We don’t believe in the American presence.”Katie Kelson, a senior majoring in economics, attended the lecture because she heard a podcast featuring Hanson.“There’s definitely a conservative bend to what he had to say,” Kelson said. “I definitely appreciate it even if I don’t agree completely.”Marisa Tsai, a senior majoring in international relations, left the lecture highly impressed.“I found a lot of what he had to say about these leaders really thought-provoking,” she said.