Mercer selects UK longevity modelling partner
Mercer, the consultancy unit of Marsh & McLennan, has selected RMS, a catastrophe risk management firm, for the consultancy’s UK pension clients.
This model will facilitate Mercer’s pension risk management consultants to evaluate how future developments in medicine and medical procedures could affect people’s lifespan and the following implications for pension scheme liabilities and company finances.
Forward-looking longevity modelling assists pension schemes to better understand and then manage the uncertainty around the future life expectancy of both their current and future pensioners.
Sofia Ben El Attar, director of LifeRisks at RMS, said: “Pension schemes are increasingly looking to protect themselves from potential shortfalls in their funding levels and to do this they need realistic and detailed future longevity scenario analyses.
“Empowering our clients to understand longevity risk in real world terms and derive actionable insights for their pension scheme clients, is one of the unique aspects of our longevity risk model. It helps to underpin confidence among pension trustees and employers.”
The model couples analysis of historical patterns with insight on potential drivers of a longer lifespan such as medical breakthroughs in cancer treatment and healthier lifestyles, therefore lessening the uncertainty around future mortality projections.
Michael Kelly, principal at Mercer, said: “As interest rates have declined, defined benefit pension liabilities have become increasingly sensitive to rising life expectancy assumptions.
“In recent years many pension schemes and sponsors have taken steps to reduce their risk exposure to changes in their asset values, interest rates, inflation, and employer covenant.
“Life expectancy – or longevity – risk is thus growing in significance as an unhedged risk for many schemes and their sponsoring employers.”
Glyn Bradley, principal at Mercer, added “The more we can understand life expectancy risk the better we are able to deal with it. RMS’ longevity model increases that understanding by linking projected improvements in life expectancy, directly back to real world events.
“It helps clients understand not just what might happen to life expectancy but why that might happen.”
Ben El Attar, concluded: “We are seeing an increased interest in longevity modelling from companies outside the typical users in the insurance industry.
“Our collaboration with Mercer is an important step in broadening access to both longevity analytics and the latest advances in medical science to a wider range of financial services companies.”
