TORONTO, April 03, 2018 (GLOBE NEWSWIRE) -- Coming off decade-high levels at the end of 2017, the financial health of Canadian defined benefit pensions plans declined only slightly in the first quarter of 2018, and overall financial health remains very strong, according to the latest quarterly Median Solvency Ratio survey from Aon, a leading global professional services firm providing a broad range of risk, retirement and health solutions.
“Despite a slight decline in median solvency this quarter, the fact remains that DB plans continue to have funded statuses that are exceptionally strong,” said William da Silva, Senior Partner and Retirement Practice Director at Aon. “That means it’s the best time in a long time for plan sponsors to implement or at least revisit their risk management strategies. With the move away from solvency funding in some jurisdictions, most plans will be soon experiencing a much different risk environment and their risk management strategies may need to evolve as a result. Couple that with a much deeper market for pension risk transfer and management solutions, and it is clearly a great time for pension plans to do something to better manage risk.”
“The first quarter has given pension plans a reminder of the rollercoaster of volatile markets, and a preview of what we expect to be a more volatile investment landscape in 2018,” noted Ian Struthers, Partner and Investment Consulting Practice Director at Aon. “We have seen some recovery in equity markets from the February selloff, but there are lots of reasons to expect more volatility. Although the economy is generally viewed as strong and corporate performance remains positive, this is offset by high valuations, a ‘long-in-the-tooth’ equity bull market, trade noise and sector risk. Additionally, interest rates present a mixed picture – policy rates are rising but a flattening yield curve implies a more pessimistic long-term view.”
“The environment puts a lot of emphasis on effective risk management. Where plans are well funded and have a solvency or windup objective, LDI strategies allow a ‘hedge path’ to be developed that takes advantage of interest rate increases,” Struthers added. “All plans need to be taking advantage of diversification across asset classes, including liquid and illiquid alternatives. When it is not clear where the next market storm will come from, it is important to build an all-weather portfolio.”
A photo accompanying this announcement is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/3e87b997-efb7-4158-b063-55faf546b72b
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 in the event of plan termination. 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 the Aon Hewitt media team: Alexandre Daudelin (+1.514.982.4910)