Addressing the Challenge of Global Ageingâ€”Funding Issues

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Part 3—Effects on Key Stakeholders—What Difference Insurance Could Make 11. The challenge of public pension reform in advanced economies Inernational Monetary Fund 141 12. Longevity risk and insurance solutions for U.S. corporate pension plans Christine Marcks and Margaret McDonald 153 13. Insurers and their role in the economy Patrick M. Liedtke and Philippe Trainar 165 14. Individuals and their financial position: the future of retirement Mark Twigg 181 About the authors 195 Publications of The Geneva Association 201 Acknowledgements This Geneva Report is the result of a collective effort involving several leading experts from international institutions. the (re)insurance industry and universities as well as Geneva Association collaborators. It is part of The Geneva Association’s mission to anticipate, identify, analyse and communicate trends that shape the global world of risk and insurance. We would like to thank the authors for their thoughtful contributions, and The Geneva Association staff for their support—in particular Françoise Jaffré for her copy-editing as well as lay-out and production management work and Eric Grant for his editing.
Foreword John R. Strangfeld Ageing is one of the most significant issues facing societies around the world. Populations are ageing as people live longer and birth rates decline. Although much of the focus on the impact of these demographic changes has been on specific countries, populations are ageing rapidly around the globe. While the demographic shifts taking place in the world are not new, there is heightened recognition of their global impact. With policymakers, regulators and companies increasingly focused on this issue, this report could not be more timely. Governments, corporations and individuals around the world are already feeling the financial strain of ageing populations. In the U.S., for example, the Social Security Trust Fund was recently forecast to run out of money in 2033. Pension systems around the world are grappling with the impact of increased longevity on pension liabilities. Because of this strain, much of the responsibility for retirement security has been shifting from government and employers to individuals, who will need to save more, work longer and look for new ways to manage the risk they now shoulder. The losses many people experienced during the financial crisis have highlighted risks that have been transferred to individuals and that they are not well prepared to manage. With the backdrop of a challenging global economy, low interest rate environment and inadequate retirement savings, the risk that current or future generations will not be able to achieve a secure retirement is growing. With its long-term perspective, institutional investment and actuarial experience expertise as well as its financial strength, the insurance industry is well-positioned to be part of the solution to meeting the financial needs of an ageing global population. The new generation of retirement products, including guaranteed lifetime income annuities, is just one of the many ways the industry is leveraging its capabilities to help companies and individuals manage the challenges associated with ageing. Similarly, through pension risk transfer solutions as well as liability driven investment strategies, the industry is helping companies manage pension risk and better match liabilities with investments. The insurance industry has a key role to play in meeting the changing needs of ageing populations. Addressing the impact of these demographic shifts will require a comprehensive broad-based response from both the public and private sectors. 1
Page 1 and 2: No. 6 June 2012 The Geneva Reports
Page 3 and 4: Addressing the Challenge of Global
Page 5: Contents Foreword John R. Strangfel
Page 9 and 10: Editorial and executive summary Edi
Page 11 and 12: Editorial and executive summary per
Page 13 and 14: Editorial and executive summary the
Page 15 and 16: Editorial and executive summary mos
Page 17 and 18: Editorial and executive summary nex
Page 19 and 20: Editorial and executive summary thi
Page 21 and 22: Part 1 Analytics 15
Page 23 and 24: How demography is reshaping the eco
Page 39 and 40: 1. Introduction Global ageing: root
Page 41 and 42: persist such as control of chronic
Page 43 and 44: Global ageing: root causes and impl
Page 45 and 46: is provided for more money. The oth
Page 47 and 48: The main and most direct impact of
Page 49 and 50: Global ageing: root causes and impl
Page 51 and 52: Insurance as a funding and risk tra
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Insurance as a funding and risk tra
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Pension funds make pre-agreed fixed
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Sources: Swiss Re Economic Research
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4. The financial crisis: impact on
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The financial crisis: impact on the
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220 210 200 190 180 170 160 150 140
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tors 90 Japan The financial crisis:
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Part 2 Solutions and Prerequisites
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Funding for old age: an overview an
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Through this rider, retirement inco
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1. Introduction 6. Insurance as a s
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Private financing also plays an imp
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4. The markets for LTC insurance Th
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Insurance as a solution to cover lo
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7. Other insurance products to cove
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1. Introduction The insurance indus
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workers have pension benefits that
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The insurance industry’s role in
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The insurance industry’s role in
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A traded longevity index does not p
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etirement age (as is happening in m
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1. The world of finance and the rea
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The holistic view: why all pillars
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What should be done: some recommend
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Retirement security in the United S
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And as for the second question pose
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Part 3 Effects on Key Stakeholders
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1. Introduction The challenge of pu
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The challenge of public pension ref
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Replacement rate 2050 70 60 50 LUX
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It is expected that the market for
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tax pensions at a lower rate. Where
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Figure 2 Funding rules under the Pe
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Asset management strategies such as
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Impact of a pension buy-in Plan spo
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1. Background Although the scope an
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Insurers are experts in managing th
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Figure 1: Inflation-adjusted growth
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7. Insurers as investors 6 Insurers
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(cf. NAIC data for 2002-2009). Over
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Insurers and their role in the econ
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14. Individuals and their financial
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Pension asset accumulation When con
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who continue to take the lead in re
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in 2009 showed that product penetra
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Over one-third of those in their 50
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lead to sub-optimal consumer outcom
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References Individuals and their fi
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About the authors About the authors
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About the authors Margaret (Peggy)
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About the authors Gordon Stewart se
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Publications of The Geneva Associat
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Publications of The Geneva Associat
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Other publications of The Geneva As
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The Geneva Association and Life, He
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The Geneva Reports Risk and Insuran
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Addressing the Challenge of Global Ageingâ€”Funding Issues

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