Club Vita LLP, an initiative launched in 2008 by Hymans Robertson LLP to help pension plans better measure and manage their longevity, is expanding into Canada as longevity exposure has become the biggest unmanaged threat to defined benefit (DB) pension plans in the country.
Longevity risk transfer has been largely confined to Europe to-date, with the UK, Netherlands and other countries pension plans and schemes taking advantage of longevity swap structures to access cost-effective sources of longevity insurance and reinsurance capacity.
With capacity and appetite for assuming longevity risk high among the world’s insurance and reinsurance markets, as well as capital market and some ILS players, there is plenty of risk transfer capital available to help Canadian pensions offload their longevity risks.
Club Vita Canada hopes to help Canadian DB pension plans get a better understanding of their longevity exposures, which in turn could stimulate growth of the nascent longevity risk transfer market there.
There has been some activity in Canada, most notably the $5 billion Bell Canada pension plan longevity risk transfer deal, which was the first of its kind in North America or Canada. But beyond that and a few full plan buyouts the longevity risk transfer market has not really got started in Canada as yet.
To date, Club Vita says that Canadian pension plan sponsors have “lacked the resources to truly understand their longevity risk.”
“Club Vita Canada Inc., officially launched today by Eckler Ltd., will build on the work already being done by the Canadian Institute of Actuaries to significantly advance the current state of Canadian pensioner longevity measurement and modelling,” they continue.
Ian Edelist, CEO at Club Vita Canada and a Principal at Eckler, commented; “Current models of measuring longevity risk for Canadian DB pension plans do not incorporate leading approaches being used in other countries. Club Vita Canada represents a giant step forward in how Canadian longevity risk is measured.
“We’re reframing pensioner longevity analysis by focusing on individual drivers, rather than easily observable groupings. The longevity analytics we will provide to our club members will allow them to understand and manage their longevity risk to a level not previously possible.”
Club Vita Canada will pool data from both public and private sector pension plans from across Canada, aiming to create the best source of longevity data in the country. Using leading-edge data analytics and statistical modelling techniques, the organisation will seek to determine the strongest predictors of Canadian pensioner longevity out of a broad range of possible factors – including lifestyle, geography and affluence.
“Research has shown that many factors play a role in human mortality – and those factors are only partially understood. Club Vita’s data collection and statistical methods will greatly benefit the Canadian longevity research landscape, and can offer pension plan sponsors the detailed information they need to better understand and manage their risk,” said Dr. Johnny Li, associate professor and Fairfax Chair in Risk Management at the University of Waterloo. Dr. Li, a leading contributor to global longevity and mortality research, and has partnered with Club Vita Canada as a peer reviewer and adviser.
While the launch of Club Vita in Canada cannot stimulate deal-flow alone, better quality risk metrics at a time when longevity reinsurance and risk transfer capacity is abundant should help to at least build greater interest in Canadian pension plans about offloading their longevity risks through longevity swaps.