Swiss Re: Life Expectancy Blunder Can Create Pension Problems

–The insurance industry should encourage the development of more refined risk models that recognize potential future longevity trends, especially in light of Solvency II (an updated regulatory requirement for insurance firms that operate in the European Union) and similar regulatory initiatives.

–Governments and regulators need to consider realigning retirement ages with life expectancy and apply consistent regulation and accountancy guidelines. Additionally, governments should look to public-private partnerships to address their own longevity exposure through defined-benefit schemes that are backed by the state.

–Governments should also support the development of a longevity capital market through the publication of reliable, consistent mortality data to allow the production of clear and strong indices. Annuity providers will need additional longevity capacity in the long term, and the capital markets may be able to provide some of this.

“While life expectancy is on the increase, the time required for implementing effective longevity funding solutions is running out,” says Christian Mumenthaler, Head of Life & Health Products and member of Swiss Re’s Group Management Board. “Insurers, governments and pension providers must act now to ensure that living longer remains a benefit to society, rather than a financial burden.”

–wh