A Healthier Way to De-Risk: The Introduction of Medical Underwriting to the Defined Benefit De-Risking Market

Abstract

The development of new underwriting techniques for bulk purchase annuities (BPAs) brings increased potential to the defined benefit pension de-risking market. As this report explains, an enhanced bulk buy-in is where the trustees buy a bulk annuity as an investment of the scheme, where some or all of the members covered by the policy are medically underwritten. Medical underwriting, which is now commonplace in the individual annuity market, has the potential to reduce the cost to the scheme of the annuity income match, compared with standard annuities, on the basis that certain members might have lower than average life expectancy.

JEL Classification: G22