Swiss Re AG · SIX:SREN
Swiss Re — Product & Knowledge Fair 2007
8 slides from Swiss Re's conference presentation, Mar 30, 2007
Slide 1: Traded Longevity Risk: How Soon?
ab Traded Longevity Risk: How Soon? Product & Knowledge Fair 2007 Rüschlikon 30 March 2007 Luca Albertini Head of European Insurance Linked Securities Swiss Re Capital Markets and Advisory
Slide 2: Mortality improvements vs. inflation
ab Mortality improvements vs. inflation Longevity risk becomes more significant when interest rates are depressed. Considerably more important given today’s low inflation environment. 10% Inflation 8% 6% Male Mortality Improvements age 70 4% Inflation Target 2% Mid-Cohort 0% improvement factors
Slide 3: Challenges Today (1)
ab Challenges Today (1) “High demand, weak supply”: Capacity has not been sufficient despite the need: – Insurance companies: £100 bn liabilities from annuity business (of which ~10% has been transferred in the last 5 years). – Corporates: over £1 tr pension liabilities. – Highlights the need for
Slide 4: Challenges Today (2)
ab Challenges Today (2) Longevity-type risk is not a natural risk to be held by traditional long- dated fixed income investors (e.g. insurance companies/pension funds). – Pension funds have exposure to longevity risk themselves. – Life insurers may have some offsetting ‘mortality risk’, but as ret
Slide 5: Possible attachment levels for longevity risk
Possible attachment levels for ab longevity risk Projected mortality levels, UK cohort aged 55-64 Projections are based on 110% UK cohort aged 55-64, 75% male/25% female 100% portfolio using the GAD’s Variance central and high life GAD base case projection expectancy estimates of 90% as % of 2004 mo
Slide 6: Where do we go from here? (1)
ab Where do we go from here? (1) Currently longevity risks are embedded in other life transactions and in broader corporate bond/equity markets (via pension plan deficits) rather than driven by standalone longevity pricing: – “By product” of other objectives. – Bulk annuity buy-out: Ability to mak
Slide 7: Where do we go from here? (2)
ab Where do we go from here? (2) A lot of potential for a large variety of longevity risks to be transferred and traded in the capital markets: – Few investors currently have mandates to invest in stand alone longevity risk; usually combined with the acquisition of assets. – Investors need to be r
Slide 8: Disclaimer
ab Disclaimer We are providing these materials solely for the purpose of providing information that may be useful in analyzing the markets and products discussed herein; however, the information herein should not be construed or interpreted as recommending any investment in any particular product,