Global retirement gap to reach unprecedented highs – Swiss Re
Global retirement gap to reach unprecedented highs – Swiss Re | Insurance Business Australia
Reinsurance
Global retirement gap to reach unprecedented highs – Swiss Re
Life insurance “has significant part to play”
Reinsurance
By
Kenneth Araullo
Jonathan Graham, head of financial markets and in force management at Swiss Re, has highlighted the growing challenge of the retirement savings gap, emphasizing the life insurance industry’s potential to address this issue significantly.
In an interview with AM Best, Graham discussed factors contributing to the gap and outlined how the industry could mitigate these concerns.
Graham identified several key factors exacerbating the retirement savings gap, including demographic shifts, social transformations, and challenges associated with state pension provisions.
“We see the major contributions as the demographic changes that we expect, the social transformation, and also, quite frankly, just the edge and challenges with the state provision of pensions at the moment,” he explained.
He also noted that the aging population is likely to double by 2050, and the emerging middle class globally will increase significantly, impacting expectations and resources available for retirement.
“The dependency gap, that’s the ratio of those over 65 to the working population, is expected to increase by 10% up to 2050. That’s taking it up to 25% globally. And in fact, in some European countries, it could go as high as 50%. So, that is really significantly adding to the affordability challenges that we see in this market,” Graham said.
The role of life insurance
Graham also outlined how the life insurance industry could play a pivotal role in closing the retirement savings gap. He described the current retirement planning landscape, traditionally supported by state and occupationally defined pensions, as increasingly unsustainable due to rising life expectancy.
The life insurance industry, according to Graham, is well-positioned to fill this gap by providing savings and protection products that leverage its experience in managing long-term investments.
“The life insurance industry has a very significant part to play through providing both savings and protection products that align the leveraging of the experience of the industry around management of retirement and savings over a long horizon and bring that to bear on the entire industry,” he said.
He also emphasized the dual benefits of combining savings and protection, which helps consumers adapt to life-changing events during retirement, such as illness or mortality.
Opportunities and challenges abound
Graham highlighted significant opportunities in the life savings market, driven by structural changes and an emphasis on private savings to address societal issues. He projected that savings premiums could reach as much as $4 trillion by 2033, fueled by an aging population and a burgeoning middle class across various regions, particularly in emerging markets.
However, he also acknowledged the challenges the industry faces, including the need for innovation in product offerings, increased financial market exposure, and regulatory risks.
“The challenge really is, how can the industry provide a set of products that really address the needs of society and of the individual, offer good value for money, and a set of risk profile that is manageable by the industry,” he noted.
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