New reports emphasise world’s old issue

April 2012 saw the launch of two reports which highlight the financial issues surrounding global population ageing and underline the important role the insurance industry plays in the solution.

Firstly, a report by Swiss Re in conjunction with The Boston Consulting Group (BCG), entitled From Silver to Gold: How Insurers Can Capitalize on Aging in China, examines the challenges posed by China’s ageing population to their social security system. The paper suggests that finding solutions will require a concerted effort among the public and private spheres, with the insurance industry a key player.

China “oldest” among BRIC nations

As early as 2015, China's working age population will begin to decline. Meanwhile, the "silver" segment of people aged 60 years and above will grow rapidly to nearly 440 million by 2050, accounting for roughly 34% of the total population.

"These figures demonstrate that China will be the 'oldest' among BRIC countries by 2050," says Robert Wiest, President of Swiss Re China. "Although it’s a big challenge, the insurance industry can help make sure that this silver segment becomes a golden opportunity for China."

The report finds that insurers should focus on the following initiatives among others:

  • Proactively drive and support regulatory reform
  • Educate consumers to adopt a longer-term view of savings and investments
  • Further understand customer insights and innovate with products and channels
  • Manage for profitability and risks, such as longevity risk

IMF report consistent with Swiss Re findings

The second report – The financial impact of longevity risk was produced by the International Monetary Fund (IMF) and calls for "better recognition and mitigation of longevity risk." It suggests that if people live just three years longer than expected, in line with past underestimations, pension liabilities could increase by about 9%.

What’s more, the result of a three year underestimation in life expectancy could mean an additional cost of about 50% of 2010 GDP in advanced economies.  As a result the IMF recommends urgent action by government, pension plans and individuals, proposing a capital market for risk transfers with an important role for re/insurers.

"The IMF’s findings and recommendations are consistent with those of Swiss Re," says Alison Martin, Head of Life & Health Reinsurance. "This, coupled with the BCG report on China, demonstrates that funding longer lives is one of the biggest challenges facing the world today and will be for many years to come. Governments, employers and the insurance industry must work together to confront these challenges."

Published 7 May 2012

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