New York state regulator investigating pension transfer deals: sources

(Reuters) - New York state’s financial regulator has subpoenaed four insurance brokers as part of a broad investigation into an industry in which life insurers take over corporate pension plans from companies that want to offload them, according to two people familiar with the matter.

At issue is whether brokers, who help put such deals together, solicited insurers who are not licensed in New York to take on the pension transfers, the people familiar with the matter said.

The New York State Department of Financial Services (NYDFS), on Wednesday, issued subpoenas to units of Morgan Stanley, Aon PLC, Willis Towers Watson PLC and Mercer, a unit of Marsh & McLennan Companies Inc, seeking documents about their communications with insurer Athene Holding Inc about “pension risk transfer” transactions, the people said.

Athene said it has been contacted by the regulator. “We confirm that the New York State Department of Financial Services (NYSDFS) has requested information regarding our PRT business,” the insurer said in an emailed statement to Reuters. “Athene is fully cooperating with the NYSDFS.”

Representatives for the other companies declined to comment.

New York’s financial regulator has authority to fine entities that it regulates and revoke their licenses to do business in New York.

Pension risk transfers are a lucrative business for life insurers and others involved with the transactions.

The deals have been around since at least the 1920s, but rising interest rates and stock market gains in recent years have helped to make them more common. That allows companies looking to purge their pension liabilities to more easily meet the requirement of fully funding their plans before selling them.

Insurers taking over a plan typically write a group annuity contract to cover those pensions, which generates payments to the retirees. Insurers are essentially betting that they will make more in investments than they pay out in pensions.

Reporting by Suzanne Barlyn; Editing by Leslie Adler