In order to continue offering guaranteed retirement income products on a large scale, such as annuities, insurers must encourage the development of capital markets in longevity risk, according to a new report.
Swiss re:, Armonk, N.Y., published this finding in its study, “A Mature Market: Building a Capital Market for Longevity Risk 2012.” The report concludes that a capital market for longevity risk could help address the challenges of funding longer lives.
The survey concludes that insurers can effectively address longevity risk by encouraging capital markets investors, particularly those engaged in the equity and bond markets, to invest in longevity instruments like annuities.
The report recommends that insurers and reinsurers work through industry bodies and with governments to design “efficient solutions” to encourage the development and expansion of capital markets. As regulatory regimes such as Solvency II add demand for longevity risk transfer, the report adds, encouraging interest from investors through education and awareness will be required.