Monday, January 3, 2011

Swiss Re estimates ... more than $17 trillion worth of pension assets are exposed to longevity risk | INN

It's clear, that a shift towards increased health must couple with reduced toxicity, in order to assure that human capital is wealthy, productive and happy.

Insurance Networking News

A Risk Management Reset for Life Insurers

Insurance Networking News, December 1, 2010

By Bill Kenealy

No matter what advances happen on the technological front, Beach argues against a brute force approach. "Risk management has become more of a wisdom issue as opposed to being able to shove in a lot of parameters into a model and see what comes out."


Risk and Opportunity

With life expectancy increasing, life insurers, pension plans and governments are confronting a growing longevity problem. Individuals are also incurring greater longevity risk as they outlive their savings. "You are seeing longevity risk being transferred back over to the individual and it’s a pretty sophisticated risk for individuals to handle on their own," says Donna Kinnaird, president of Swiss Re Life & Health America.

Thus, the longevity problem also presents an opportunity. Reinsurers are well positioned to help mitigate longevity risk, Kinnaird says. "We are going to have to find a way to help people handle this exposure."

However, one concern is finite capacity in the reinsurance market as Swiss Re estimates that globally more than $17 trillion worth of pension assets are exposed to longevity risk. "We’ll eventually get to the point where there’s just too much risk for reinsurers to be of assistance," she says.

Accordingly, Kinnaird says cooperation between governments, employers and the financial services industry will be needed in order to create the mechanisms to share this risk with the broader capital markets. To this point, a group of insurers, reinsurers and banks have set up the Life and Longevity Market Association to promote a dedicated capital market for longevity and mortality-related risk.


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