Swiss Re calls for a longevity market

New capital market would help manage risk.

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story_images_flaming_cakeThe scale of longevity risk is too vast for insurers alone without the development of a capital market, says new Swiss Re report.

Titled A Mature Market: Building a Capital Market for Longevity Risk, the report says a liquid capital market in longevity risk can ensure long-term funding of people’s longer lives.

“A capital market for longevity risk will be vital for the insurance industry in the long term,” says Alison Martin, head of life & health reinsurance at Swiss Re. “As the scale of the risk is so vast, capacity is unlikely to meet the future demand for longevity products without a capital market.”

The study addresses questions posed by investors, regulators and pension funds about whether a longevity capital market is viable and how such a market might work.

Life expectancy is increasing globally. As people live longer, ensuring that they can retire with sufficient financial security to enjoy the years to come is one of the biggest challenges facing society today.

However, recent estimates suggest that the average pension fund scheme is underfunded by 24% and defined benefit assets which are exposed to longevity risk total over USD 20 trillion globally, says the report.

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