Globally, people are living longer, placing unsustainable pressure on government systems and employer-sponsored pension plans to support aging populations. Individuals are increasingly left to finance their own retirement – but too often coming up short. According to the World Economic Forum, in the U.S. alone the retirement savings gap – between what people have and should have – grows $3 trillion every year and is projected to reach an alarming $137 trillion by 2050.
The life insurance industry has an enormous opportunity and, more importantly, a responsibility to help ameliorate the decline of traditional pension plans. Consider this: The American Council of Life Insurers reports that the life insurance industry in the U.S. paid out $2.1 billion every day in 2018, compared to $2.7 billion paid out by Social Security. This includes $1.1 billion of annuity payments. The vital role our industry already serves is therefore clear and the obligation to do even more an inevitability.
Life insurers and reinsurers bring the right combination of capabilities to address the central issue of people outliving their funds: an unmatched knowledge of mortality and longevity trends and deep investment expertise. We understand the liabilities associated with both biometric and investment risk. Unsurprisingly, pension fund assets have begun migrating to the insurance sector, and this transfer promises to accelerate in the near future.
At RGA, our GFS team partners with clients to deliver pension risk transfer solutions. With asset-intensive longevity transactions, for example, RGA takes on future annuity payments in exchange for a single, upfront premium, thus safeguarding the assets and ensuring guaranteed lifetime income for annuitants. The team has executed numerous such transactions in the U.K., U.S., and elsewhere over the past five years totaling billions of dollars.
GFS helps secure retirement income in other ways as well. Our longevity business supports employers by mitigating risk associated with life annuities and pension obligations, and our stable value team in the U.S. provides wrap coverage to 401(k) and other defined benefit plans, preserving principal and achieving steady returns for participants. At RGA, we understand the role we play in ensuring people’s long-term financial security and are committed to expanding that role to meet the needs of aging populations.