2011: Expanding Retirement Income Opportunities for Insurers - Managing Increased Longevity Risk


Price : $1,750.00



The life industry has grown significantly during the last two decades by helping individuals accumulate retirement assets. However, the growing number of Baby Boomers near or entering retirement are increasingly concerned about outliving their accumulated assets. At the same time, defined benefit plan sponsors are concerned about meeting their obligations to current and future retirees as life spans increase. Both groups, then, increasingly seek to transfer their longevity risk. This transfer of longevity risk creates a tremendous growth opportunity for insurers who develop and distribute retirement income products. However, profitable growth depends on managing the risks associated with these products. This study identifies the growth opportunity for insurers that provide retirement income products that manage longevity risk. It explores the key risks to profitable growth that insurers face as they develop this opportunity. It examines how insurers could manage these risks.



1. Introduction

2. Executive Summary

3. The Demand for Transferring Longevity Risk

  • Uncertain Longevity Improvement, a Foundation of Concern
  • Two Demands for Longevity Risk Transfer
  • Summary

4. The Sizeable Market Opportunity for Insurers

  • Why Seize the Opportunity?
  • The Individual Longevity Opportunity
  • The Defined Benefit Plan Longevity Opportunity
  • Summary

5. The Developing Longevity Product Landscape

  • The Retirement Product Landscape for Individuals
  • Defined Benefit Plan Longevity Risk Products
  • Summary

6. Longevity Risk’s Impact on Reserves and Capital

  • Longevity Impacts Statutory Reserves
  • Longevity Impacts GAAP Reserves and Deferred Acquisition Costs
  • Longevity Impacts Capital Requirements
  • Summary

7. Improving Longevity Risk Management

  • Manage Longevity Estimation Risk
  • Reduce the Financial Impact of Longevity Risk
  • Summary 

Introduction

The life industry has grown significantly during the past two decades by helping individuals accumulate retirement assets. However, as the growing number of Baby Boomers near or enter retirement, they are increasingly concerned about outliving their accumulated assets. At the same time, defined benefit plan sponsors are concerned about managing their assets to meet their obligations to current and future retirees as life spans increase. Both groups, then, seek to manage their longevity risk as their focus shifts from asset accumulation to asset decumulation. Longevity risk is the negative economic impact when actual longevity significantly mismatches expected longevity.

This transfer of longevity risk creates a tremendous growth opportunity for insurers who develop and distribute retirement income products. However, profitable growth depends on managing the risks associated with these products.

  • Insurers will be accumulating longevity risk as they sell more retirement income products.
  • Insurers will face investment management challenges as liabilities lengthen.

This study identifies the growth opportunity for insurers that provide retirement income products that manage longevity risk. It explores the key risks to profitable growth that insurers face as they develop this opportunity. It examines how insurers could manage these risks.