Thinking ahead to meet life’s challenges

Life and health reinsurance accounts for nearly a quarter of the global reinsurance market, which totals around USD 200 billion. Swiss Re is a market leader, with USD 9.7 billion in premiums earned and fee income. The company sees growth potential in longevity as well as in traditional life insurance. Demographic and medical trends are evolving quickly – as are consumer and regulatory demands. Swiss Re supports its clients so that they can grow profitably while adapting their business models to change.

A changing business landscape

Economic development and medical advances have greatly increased life expectancy in many countries: In 1990, for example, a 60-year-old British woman would be expected to live to the age of 84. Today, that expectation is over 88 – and could be over 90 by 2030. As a result, the life insurance and reinsurance industry has shifted its focus from predominantly covering mortality risk to developing longevity and viable health insurance solutions – the other side of the coin. Increased life expectancy is clearly a good thing, but tackling the costs associated with an ageing population has become a major challenge for governments and employers, which means that individuals often end up bearing the financial risk. This offers an opening for insurers to develop longevity products that are simple, transparent and robust. Swiss Re is expanding its product range to help insurers and pension funds turn this challenge into an opportunity.

At the same time, there is still vast growth potential in traditional life insurance: Millions of people worldwide fail to buy sufficient protection because they are unaware of how effectively it can mitigate the financial impact of death, illness or disability. A recent survey conducted by Swiss Re revealed that, in continental Europe alone, consumers are under-insured by EUR 10 trillion – an opportunity for Europe’s life insurers to earn an additional EUR 25 billion in annual premiums.

Leading expertise based on experience since 1863

In a changing market, profitable growth depends on product innovation. Here Swiss Re, with its expert knowledge and risk transfer capabilities, provides essential support. Swiss Re is, for instance, a pioneer in life insurance securitisation, having already transferred EUR 1.5 billion of extreme mortality risk to the capital markets through its groundbreaking Vita securitisation programme. Furthermore, Swiss Re issued the first bond covering longevity trend risk to the capital markets in December 2010.

Swiss Re’s presence is global: In 2010, the company wrote new life and health business in 107 countries worldwide, working with 1 207 business partners. In a major market like the US, where Swiss Re reinsures all of the top 50 life insurance groups, the company insures approximately 8% of the population: around 24 million lives. Globally, Swiss Re paid life claims of more than USD 8 billion in 2010 – and a total of USD 50 billion over the past decade.

This scale and scope mean that Swiss Re’s clients all benefit from deep, global insight into demographic and medical trends. They gain access to leading research and underwriting knowledge, provided by over 200 life and health underwriters and medical experts. Today, more than 7 500 insurance professionals in 90 countries rely on Life Guide, Swiss Re’s online life and health underwriting manual. Introduced in 2004, Life Guide’s expertise-driven, evidence-based format has helped extend the limits of insurability, making it possible for more people with illnesses like cancer and serious heart conditions to buy life insurance.

Technology is also essential to profitable growth in a competitive environment. Insurers in sixteen countries now use Magnum, Swiss Re’s automated life and health underwriting tool, to get more business on their books quickly and efficiently, maintaining consistent standards while improving client relationships and reducing costs through a straightforward underwriting process at the point of sale. Magnum processes more than 2.5 million policies every year and through its data capabilities enables insurers to gain a deep insight into the business they write.

Turning risk into profitable growth

Recently, Swiss Re applied its life and health expertise to tailor a tele-underwriting solution based on Magnum for clients in Brazil. Developed by Swiss Re and its partner Advance Medical, this solution helps clients achieve high acceptance rates and process large volumes of business quickly and efficiently. Life insurance can be underwritten without the need for expensive medical evidence, reducing the time required to issue a policy from weeks to just a few hours. Tele-underwriting allows clients to apply more sophisticated underwriting (and therefore risk selection) techniques, while still keeping costs low – a clear net benefit and another example of how Swiss Re helps to turn risk into profitable growth.