James Ciamarro

Longevity Risk Perspectives
Moderator:
James Ciamarro, FCIA, FSA
Speakers:
Marco Dickner, FCIA, FSA
Brent Simmons, FCIA, FSA
Why Longevity Now?
James Ciamarro, FCIA, FSA
Assistant Vice-President, Longevity
Baby-boomers are retiring and living longer…
Distribution of population
Life expectancy at age 65
22
21.2
21.7
20.9
21
20.3
19.7
Female
20
18.7
Male
19
18
18.6
17.5
18.2
17.8
17
16.2
16.7
16
15.0
15
15.5
13.9
14.1
14.5
14
13.8
13
12.9
13.3
13.6
12.8
12
1930 1940 1950 1960 1970 1980 1990 2000 2005 2007 2009
Sources: Statistics Canada and Canadian Human Mortality Database
3
Living longer is a great thing, but…

Poses a challenge to sponsors of Defined Benefit (DB) pension
plans and re/insurers with annuity business
Increase in liabilities/reserves
Life expectancy + 1 year
12.0%
10.0%
8.0%
Male + 1 year life
expectancy
6.0%
4.0%
Female + 1 year life
expectancy
2.0%
0.0%
50
65
75
85
Source: RGA estimates
4
History of Underestimating Life Expectancy
Source: Fifty Years of United Kingdom national population projections: How accurate have they been? Chris Shaw, Office for
National Statistics (2007), © Crown copyright 2007
5
Longevity Risk Transfer Flow in Canada
DB Pension Plan
- Annuity buy-out
- Annuity buy-in
- Longevity insurance
Insurer
- Longevity reinsurance
- Coinsurance
Reinsurer
6
Longevity: The Reinsurer’s Role
James Ciamarro, FCIA, FSA
Assistant Vice-President, Longevity
Reinsurer’s role
Support direct
annuity writers
Capacity
Inforce block
Expertise
New
opportunities
Reinsurer
International
presence
Security
8
Mortality improvement (Male)
Canadian Population
vs. Industry Scales
3.5%
3.5%
3.0%
3.0%
2.5%
2.5%
2.0%
2.0%
1.5%
1.5%
1.0%
1.0%
1959-2009
0.5%
1994-2009
1999-2009
2004-2009
AA
CPM-B 2010
CPM-B 2030+
0.5%
1999-2009
0.0%
2004-2009
55-59 60-64 65-69 70-74 75-79 80-84 85-89 90-94 95-99 100+
0.0%
60
65
70
75
80
85
90
95
100
Source: RGA, based on Statistics Canada data
9
Potential demand is significant…
DB liabilities
2013 transactions
%
Canada
$1.4 trillion
$2.2 billion
0.2%
UK
£2.0 trillion
£16 billion
0.8%
Source: Lane Clark and Peacock (LCP), LIMRA and various sources
18
UK transactions (£B)
16
Canadian transactions ($M)
Longevity swaps
2,500
Bulk annuities
2,000
Bulk annuities
14
12
10
1,500
8
1,000
6
4
500
2
0
0
2006
2007
2008
2009
2010
2011
2012
2013
2007
2008
2009
2010
2011
2012
2013
10
Risk transfer solutions: Longevity reinsurance
Administration &
Benefits
Insurer
Actual Benefits
Annuitant
Fixed Premiums
Only longevity risk is
transferred
Reinsurer
11
Risk transfer solutions: Coinsurance
Administration &
Benefits
Insurer
Actual Benefits
Annuitant
Single Premium
Longevity & Investment Risks
Transferred
Reinsurer
12
Key takeaways






Longevity risk is real with material financial implications for DB
pension plans
The potential demand for risk transfer in the Canadian market is
significant
The re/insurance industry is positioned to help manage this risk
Sponsors, consultants and insurers need to work together
The Canadian pension and insurance industries lag the UK regarding
longevity practices
Expect to see continued evolution in Canadian longevity practices
13

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