Leveraging data to assess and manage risk


By Keith McDonagh
Head of the Institutional Solutions businesses for Massachusetts Mutual Life Insurance Co. (MassMutual).
Posted on Feb 11, 2021

In our increasingly digital world, data is an essential element influencing business strategy and enterprise management. In the pension space, advanced data management and analytics are invaluable tools in managing assets and liabilities to optimize the impact on a company’s bottom line.

The value of data management in dynamic markets

Quality data management and robust analytic capabilities are the backbone of actuarial forecasting, investment oversight and compliance reporting. Detailed in a recent P&I Partner Insights, this fact is especially true in today’s dynamic markets:

Rate Stressors: The current protracted period of declining rates has put significant stress on many plan sponsors, causing pension plan liabilities to increase. Effectively managing these changes with timely and accurate market data has made keeping abreast of rate changes and their impact on plan liabilities mission critical.

  • At the close of Q3 2020, year-to-date discount rates had fallen roughly 65 basis points. For a pension plan with a liability duration of 14, that translates to a 9 percent increase in liability.

Volatile Markets: Access to timely market data and forward-looking risk analytics is highly important. The quality of future rate and return scenario projections impacts the determination of future actions and provides an informed foundation for the evaluation and potential adoption of de-risking strategies.

  • Historic equity market performance has improved many plans’ funded statuses by helping asset growth keep pace with increasing liabilities. Nonetheless, the overall political, social and economic environment remains volatile and market growth can easily evaporate as it did last March when the Dow Jones Industrial Average (DJIA) plummeted to 18,591 from over 29,000 in just one month.

Employee benefit data spectrum

Of course, the growing importance of data and data management extends beyond pensions to other employee benefits. More broadly, actuarial estimates for insurance coverage is constantly reassessed based on more comprehensive and accurate data streams coupled with more sophisticated predictive algorithms.

Across the employee benefits spectrum, advances in data collection, availability and analysis are helping benefits administrators, HR officers and CFOs understand, predict and control the impact of benefit costs on their firm’s financial condition.

Looking toward the future

The availability of data today offers businesses tremendous opportunities to make better informed decisions across the range of a company’s business operations. Since 1861, MassMutual has stood by its customers through wars, depressions, recessions, market crashes and many other financial challenges. We’ve stood the test of time by applying our risk management capabilities and financial experience to help customers prepare for the worst and take advantage of opportunities. With this expertise, we help our customers manage the impact of retirement benefit costs and risks on their balance sheets with our corporate owned life insurance and pension risk transfer solutions. Together with your trusted advisor, please reach out to us to learn more about the solutions we offer.

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The information provided is not written or intended as specific tax or legal advice. MassMutual, its employees and representatives are not authorized to give tax or legal advice. You are encouraged to seek advice from your own tax or legal counsel. Opinions expressed by those interviewed are their own and do not necessarily represent the views of MassMutual.