Europe Wakes up to Longevity Risk
07 June 2012 (PLANSPONSOREurope.com) - European countries are beginning to wake up to the challenges posed by rising life expectancy, according to Aon Hewitt.
The analysis picks out Switzerland, Germany and Ireland in particular as the countries that are most aware of these challenges. Aon Hewitt has noted that in Switzerland, Germany and Ireland an appetite to de-risk clearly exists, however historic assumptions about life expectancy are only now being reviewed and updated. As these updates continue to happen over time, and a more credible view of life expectancy emerges, Aon Hewitt says it anticipates a charge towards the risk settlement market.
Matt Wilmington, Principal Consultant in the International Retirement and Investment team at Aon Hewitt, said: “The risk settlement market has blossomed in the UK because trustees, sponsors and providers have had a better shared understanding of the issues around estimating longevity. That has helped the decision-making process, as the amount and purpose of the premium paid to the provider – usually banks and insurers – has been well understood.
“Elsewhere, whether in Europe or further afield, the challenge has been for countries first to recognise that there is an issue and then to establish a credible ‘best estimate’ view. That has not been helped in some cases by a slowness in responding to trends in funding and accounting valuations.”