Insurers can’t cope with longevity risk alone

Capital markets will have to play a greater role in off-setting longevity risk, says a new report by Swiss Re.

The report, A mature market: Building a capital market for longevity risk, says that although insurers and reinsurers play a significant role in off-setting longevity risk, a liquid capital market of that risk will be essential in dealing with an ageing population.

Recent estimates suggest that the average pension fund scheme is underfunded by 24 percent and that defined benefit assets, which are exposed to longevity risk, total over $20 trillion globally. This demonstrates the need for more insurance industry capacity to off-set the risk.

"As the scale of the risk is so vast, capacity is unlikely to meet the future demand for longevity products without a capital market,” said Alison Martin, head of life & health Reinsurance at Swiss Re.