Pensions - Articles - Willis launch longevity risk solution

 The innovative solution allows pension schemes to insure against the risk of a shortfall in their pension schemes caused by longer-than-forecast life expectancy – called “longevity risk” – through a captive insurance company. While there is little appetite for longevity risk protection from direct insurers, reinsurance companies are more interested in underwriting this risk because it offers a valuable hedge against other mortality risks in their portfolios. Pension schemes that establish their own captive have a direct link to this reinsurance capacity.

 David Lewis, Director of Consulting for Willis’s Global Captive Practice, said: “The management of longevity risk has always been a key consideration for pension schemes. As life expectancy around the world continues to increase many pension schemes suffer from a financial shortfall as their members claim benefits for decades longer than the fund originally anticipated or budgeted for.”

 He continued: “This new captive solution offers pension schemes an efficient and cost effective mechanism for transferring longevity risk off their own balance sheets.”