Seeking a solution for Europe's pensions

Swiss Re recently took part in a dialogue, Europe's pensions crisis: finding a solution, which was organised by the European Policy Centre (EPC) in Brussels. The event took place against the backdrop of the recent European Commission Green Paper on pensions.

Discussions focused on how Europe’s pension systems can ensure sustainable retirement provision and maximise European citizens’ future well-being. The role of private pensions systems and insurance in helping find innovative solutions to funding Europe's ageing society was discussed, along with labour market reforms.

Speakers were drawn from a wide range of disciplines and organisations, including the OECD, the French Pensions Advisory Council, the European Commission, as well as Swiss Re and members of the EPC.

Longevity risk

Alison Martin, Head of Life and Health Products, who represented Swiss Re on the panel, explained that the challenge is not just that people are living longer – which is a positive trend in society – but also the fact that how long they live has been significantly underestimated for decades.

Alison Martin, Head of Life and Health ProductsThis longevity risk means that employers' defined-benefit pensions plans which promise to pay a retirement income for the rest of employees' lives have been left with significant funding shortfalls. Furthermore, European citizens could be left with larger tax bills due to the increased costs of state and public sector pensions.

The enormity of the issue means that a consensus approach is required to seek a solution. Martin focused on how governments, employers and financial service providers – especially insurers – need to work together. All these parties have a responsibility to educate citizens, create structures and incentives to save, as well as seek public-private, long-term solutions.

Long-term, viable solution

Certain reinsurers and insurers are looking to take on longevity risk from employers and have the capacity to do so for some time to come. However, this capacity is finite and the development of a capital market is essential to the long-term viability of a solution for the associated risk. Martin called on stakeholders to help increase awareness of the issue and encourage capital market investors to participate.

"Understanding the drivers that affect people's life expectancy," Martin concluded to the delegation of Brussels policymakers and journalists, "is a key challenge for governments and industry alike."

Published 25 March 2011

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