There are significant implications of the impending discontinuation of LIBOR and transition to SOFR for U.S. annuity liability valuations.
The expected hedge cost for a hypothetical GLWB block (see Index Methodology1) is estimated to be 229 bps as of the end of December 2020, down 10 basis points from the previous month, driven by an increase in long-term interest rates. The Index Methodology provides additional details about the assumptions and methodologies underlying the Milliman Hedge Cost Index.
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Hedge Cost Index December 2020
The expected hedge cost for a hypothetical GLWB block (see Index Methodology1) is estimated to be 229 bps as of the end of December 2020, down 10 basis points from the previous month, driven by an increase in long-term interest rates.