Aon’s Median Solvency Ratio at end of Q2 2019 stood at 99.3%
TORONTO, July 03, 2019 (GLOBE NEWSWIRE) -- Despite relatively strong asset returns, the solvency positions of Canadian defined benefit pension plans declined slightly in the second quarter of 2019, according to the latest Median Solvency Ratio survey done by Aon, the leading global professional services firm providing a broad range of risk, retirement and health solutions. The median solvency remains high by historical standards but falling bond yields suggest that pension plan sponsors should prepare for volatility ahead.
“The liability horse has bolted as bond yields have fallen, and plan sponsors shouldn’t wait for the equity horse to leave the stable as well,” said Erwan Pirou, Chief Investment Officer for Aon’s Delegated Investment Solutions (Canada). “Sentiment is changing direction on a dime. In six months, we have gone from a rising-yield environment, which lowered pension fund liability, to a falling-yield environment, which is increasing liability. Traditionally structured pension plans will struggle to keep up, and sponsors could well miss opportunities to de-risk before it’s too late. The past six months have put the need for speedy and efficient decision-making into a real-world context.”
“Despite the slight solvency ratio decline in the second quarter, the fact remains that the funded status of DB plans in Canada is still high, while many plans are at or getting close to a strategic end state,” said William da Silva, Canadian Practice Director, Retirement Consulting, Aon (Canada). “Given the volatility we have seen over the past few months, it’s arguably more important than ever that plan sponsors review and, where necessary, revise their end-game strategy. Is it settlement? Hibernation? Or perhaps sustainability? With market conditions changing quickly, governance processes have to be agile, because windows of opportunity – and risk – will emerge and close suddenly. Plans will often have to be able to move quickly to take advantage.”
About Aon’s median solvency ratio survey
Aon’s median solvency ratio measures the financial health of a defined benefit plan by comparing total assets to total pension liabilities on a solvency basis according to the different legislations. It is the most accurate and timely representation of the financial condition of Canadian DB plans because it draws on a large database and reflects each plan’s specific features, investment policy, contributions and solvency relief steps taken by the plan sponsor. The analysis of the plans in the database takes into account the index performance of various asset classes, as well as the applicable interest rates to value liabilities on a solvency basis.
Aon plc (NYSE:AON) is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our 50,000 colleagues in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance.
For further information please contact Alexandre Daudelin (+1.514.982.4910)
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