Fitch Report Says Insurers' Pension Funding Improves

(November 15, 2010) — The funded status of US life and non-life insurers’ defined benefit pension plans has improved in 2009, increasing to an average 81% funded, up eight percentage points from a year earlier, according to a Fitch Ratings study.

The release cited improved 2009 funded status to higher investment returns and significant contributions from employers. “Further significant contributions will still be needed if insurers are to meet the stepped up funding requirements of the Pension Protection Act of 2006 given the investment environment and changing pension assumptions,” the news release stated. It added that absent high levels of equity market performance improvement, the longer-term trend of asset allocation will shift toward fixed-income securities and alternative investments (to a smaller extent) from equities will continue.

While equity allocations increased to an average 49%, up four percentage points from a year earlier, bonds were at 41%, down two percentage points. Meanwhile, hedge funds were at 3%, up two percentage points; real estate stayed flat at 1%; and other investments dipped to 6%, down four percentage points from a year earlier.