Making the most of the longevity dividend

With rising longevity and lower birth rates, one in six people globally will be older than 65 by 2050. Longer lives can pay big dividends, but bring challenges, too. While Japan and Switzerland lead the healthy longevity race, nations like the US face rising old-age disability. There's also a retirement saving shortfall. The life span, health span and wealth span all present opportunities for re/insurers.

Human life expectancy is rising, inspiring debate over what this means for our collective futures as well as for the planet. Some predict many people born today will reach 100 years. The first person who will live beyond 150 may already be walking the earth. Still others contend radical extension of overall human longevity is unlikely after big gains since the early 20th century.

I am intrigued by what the future holds, too. As Chief Underwriting Officer at one of the biggest Life & Health reinsurers, however, I tend to focus on the practical side of this discussion: making sure our underwriting expertise keeps pace with powerful demographic trends like ageing societies.

To this end, Swiss Re recently convened an Expert Forum exploring the intersection of rising longevity, financial planning, technology and healthcare. We enlisted leading voices to engage hundreds of our clients and employees on the interrelated topics of the human lifespan, health span, and wealth span.

After all, helping our life insurance policyholders live longer, healthier lives with sufficient resources for the long haul is good for them and good for our industry.

Our Forum experts emphasised how rising longevity is likely good for humanity, too. "People who are healthier work longer, provide more care, spend more money, and they volunteer more," David Sinclair, chief executive of the UK's International Longevity Centre, told Forum attendees. "There could be a longevity dividend."

But longevity and health trends are hardly uniform, according to data presented by Dr. Hans Groth, chairman of the World Demographic & Ageing Forum (WDA). His figures show disparities in the rate at which people across a selection of countries are adding healthy and disabled years later in life.

In Japan, for instance, where average life expectancy already exceeds 80 years, gains in healthy life expectancy after the age of 60 in recent decades have outpaced growth in disability years, WDA figures show. France and Switzerland experienced similar developments. For these countries, this indicates potentially higher quality of life well into people's twilight years.

This is something worth celebrating, for individuals and institutions responsible for caring for ageing societies.

In the United States, a more unsettling trend has emerged, as Americans after age 60 added disabled years faster than healthy ones. For US women, in fact, disability years are growing twice as fast as healthy ones. The upshot is that many US residents may experience longer periods late in life with conditions that reduce quality of life and  drive up healthcare and economic costs.

Another of our Expert Forum speakers, Jay Olshansky, a University of Illinois Chicago professor and leading longevity researcher, is sceptical of wildly optimistic predictions that life expectancy will see revolutionary gains like those of the last century. But he said simply living longer shouldn't be the priority, either. "The focus of ageing science and modern medicine should be on health extension, not life extension," Olshansky said.

At Swiss Re, helping people live healthier lives is on our minds, too. We’ve sought to raise awareness about behaviours crucial to boosting healthy longevity. Among other things, we've identified what we call the "Big 6" lifestyle factors that contribute to longer, healthier lifespans, including mental well-being, physical activity, sufficient sleep, eliminating substance use, and good nutrition.

We have also emphasised the importance of improved metabolic health, including through long-running initiatives like our Food for Thought series with the medical journal BMJ to explore solutions to chronic conditions like obesity and diabetes.

With rising longevity and lower birthrates, ageing societies must grapple with yet another big challenge: as the proportion of retired people grows , so is the "old-age dependency ratio",  putting a greater burden on working-age people to finance support systems for retirees. Amid increasing discussion globally over how to preserve pension systems founded in an era when workers outnumbered retired people, more responsibility for retirement savings is shifting to individuals.

This challenge is something our experts at Swiss Re Institute (SRI) have highlighted in a pair of recent reports, our sigma publication entitled Life insurance in the higher interest rate era as well as the separate report Capturing the insurance opportunity in the private savings market.

Among other conclusions, SRI found that the global retirement savings rate across all government, employer, and individual pensions already falls well short of what people will really need, with the savings gap in eight major economies at USD 106 trillion in 2022, and due to widen in coming decades.

Life reinsurers and insurers can help here by collaborating on products tailored to policyholders' evolving needs. Higher interest rates have significantly boosted demand for savings and retirement products over the past two years, creating new opportunities. At Swiss Re, we partner with clients to free up capital so they can pivot swiftly to meet emerging needs with innovative products. Our global teams of actuaries and financial market specialists offer risk knowledge and risk transfer solutions to enable pension funds, life insurers and other partners to manage their risks effectively.

Admittedly, the demographic challenges many societies face are very complex: their citizens are getting older, they want to be healthier as they age, and they need greater financial resources to fund longer retirements. Reinsurers and insurers can make a positive contribution on each of these fronts as we work to make the most of the longevity dividend.