Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Longevity gains increasing around the world, except the US: Swiss Re


Longevity gains and so the life expectancy of populations are increasing around the world and this is expected to continue with a new wave of gains expected, but the United States has moved the other way, as life expectancy has fallen, according to research from Swiss Re.

longevity-imageSwiss Re’s new report makes it clear that longevity risk is set to rise for pensions and those exposed to cohorts living longer lives in the majority of the world, while in the US it seems mortality risk has been increasing and in the UK life expectancy gains are slower than many other countries.

In general, improvements in life expectancy have slowed, Swiss Re explains, which has been reflected in recent actuarial reports that suggest longevity risk had declined in some regions of the world, adjusting longevity risk hedging decisions for some pensions and other exposed organisations.

But, Swiss Re anticipates more longevity gains coming through over the next two decades, with medical and science breakthroughs as well as a continued push to improve health and quality of life all play into longevity and mortality trends.

This is especially true in the fields of cancer research and breakthroughs linked to ageing related conditions such as Alzheimer’s, Swiss Re believes.

Paul Murray, Swiss Re’s CEO of L&H Reinsurance, explained, “While people continue to dream of life expectancy surpassing 100 years, the gains of the last century are under threat. Clearly medical research has the power to drive the next big wave of improvements in longevity. However, individuals need to maintain and intensify their healthy lifestyle choices to ensure they live longer and healthier lives. As a society, we need to address barriers to healthcare access.”

Swiss Re states that life expectancy breakthrough’s tend to come in waves and thinks we’re due another of these, similar to large-scale social trends, such as smoking cessation, or pharmaceutical innovations that reduce blood pressure and cholesterol, each of which triggered a steep improvement in life expectancy.

Swiss Re states that, “Global average life expectancy for a person born in 2020 is well over 70 years, compared with only 55 years at the end of the 1950s.

“However, since 2010, factors such as obesity-related diseases, the growing impact of Alzheimer’s, and unequal access to health care have whittled away at life expectancy gains in many parts of the world. As a result, life expectancies have levelled off in advanced markets.”

The United States in particular has diverged, with issues such as violent crime and the opioid crisis weighing on longevity, as well as obesity and unequal access to health care.

Swiss Re explained, “The US diverges from other advanced markets, as of 2019 only the top 10% of the US population by socioeconomic status have a comparable life expectancy at birth to the OECD average of around 80 years for men and 84 years for women. For a US male born into the lowest 10% by socioeconomic status, life expectancy is only around 73 years. The US trend is linked to unequal access to healthcare as a result of growing socioeconomic inequality. Further, with an estimated 70% of the population affected by obesity, diseases such as type 2 diabetes are becoming more prevalent. Opioid-related deaths have impacted life expectancy, with an eightfold increase since 1999.”

The UK has also seen life expectancy growth decline, and it has only increased by one year since 2010, having previously increased from 71 to 80 years between 1968 and 2010.

Japan and Switzerland are the countries with the greatest longevity expansion, with an average of around 84 years in both countries.

Swiss Re says that advances in cancer treatments and diagnosis have the highest potential to kickstart life expectancy improvements.

In addition, the reinsurance firm believes that the use of mRNA vaccines, which were successfully deployed during the COVID-19 pandemic, present another area of potential improvement.

Public policy can also drive change and ultimately longevity gains, such as by encouraging screening for cancers, the reinsurer notes.

On top of which, work to understand diseases that affect people in later life, such as Alzheimer’s, will play a role, and technology like artificial intelligence can help to improve medical research outcomes.

Natalie Kelly, Head of Global Underwriting, Claims & R&D at Swiss Re commented, “Medical technology, lifestyle changes and access to healthcare will propel the next wave of longevity improvements. The public and private sectors both have roles to play. For the insurance industry, it is vital that we understand these complex drivers so we can continue to protect customers when they need it most and encourage people to make lifestyle choices that support longer, healthier lives.”

Longevity risk could therefore accelerate for those holding it, so pension funds, insurers and others that are exposed to the increased length of their customers lives, which could stimulate more demand for longevity risk transfer, hedging or longevity swaps, and reinsurance in the years to come.

On the other hand, those regions where longevity gains are slowed, or almost going backwards, such as the United States, may see some life insurers facing higher levels of mortality risk than their models had anticipated it seems, again perhaps presenting a need for more risk transfer and reinsurance capital.

Longevity gains can also be relevant for certain life settlements investment strategies, depending on their structure.

View details of many longevity swaps and longevity reinsurance deals in our longevity risk transfer deal directory.

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