Club Vita, a provider of longevity analytics, and NISA Investment Advisors have announced a strategic relationship, which will give access to Club Vita’s longevity risk analytics to NISA and its defined benefit (DB) plan clients.
Club Vita expands on the typical longevity rating factors of gender and affluence by capturing lifestyle, via using the ZIP+4 model. The firms say the lower the interest rate environment, the greater the cost of misestimating pension plan participants’ life expectancies.
The two firms say that, over the past decade, understanding longevity patterns and trends has become a more significant challenge as most corporate pension plans have aging populations following their closure to new participants. The historically low-interest-rate environment coupled with evidence of increasingly different experiences of socio-economic groups has only increased the demand for more insightful longevity analytics.
“Understanding longevity risk is a vital part of a pension plan’s risk management strategy,” says David Eichhorn, NISA’s CEO and head of investment strategies. “Access to leading-edge longevity analytics will allow us all a better understanding of our clients’ plan-specific demographics. Whether the plan sponsor’s end goal is termination or hibernation, avoiding the misestimation of longevity is crucial to a smooth strategy execution.”
Through Club Vita’s analytics, NISA clients can tailor their existing mortality assumptions, seek to refine their cash flow projections, and improve the effectiveness of hedging strategies in place to manage investment risk. In addition, the objective of the analytics is to reduce the information asymmetry between NISA clients that are considering annuity purchases and life insurers.
“Our analytics enable pension funds to adopt the best practice risk management techniques of life insurers, including making informed decisions on risk transfer annuity purchases,” says Dan Reddy, Club Vita’s U.S. CEO.
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