Clifford Chance

Pension Risk Transfer Market - Department of Labor Releases Report to Congress on Interpretative Bulletin 95-1

July 17, 2024

After a thorough review of the pension risk transfer market and the function that the Department of Labor's Interpretative Bulletin 95-1 ("DOL 95-1") has had in that market, the DOL released a report to Congress (the "DOL Report") in which it did not recommend any changes to DOL 95-1. The DOL Report examined various perspectives of insurance industry stakeholders on a substantial number of key areas.

The DOL Report was inconclusive on whether private equity ownership of insurers is inherently riskier than ownership by other types of owners based solely on the types of investments held by private equity backed insurers. Further, while the DOL Report examined the ways in which investments and liabilities held by insurers have generally become riskier, there is no clear evidence that the increase in risk will lead to an increasing number of distressed insurers, especially in light of the regulatory regimes that govern insurance activities. Finally, although the DOL Report acknowledged that the use of affiliate and offshore reinsurers may subject an insurer to more risk due to different regulatory requirements, it noted that such reinsurance strategies can offer efficiencies and risk management tools that could improve an insurer's overall financial strength and performance.

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