Risk Transfer TV- talking longevity with Pension Insurance Corporation

Harry Harper: Welcome to Risk Transfer TV. I'm Harry Harper of the XPS Bulk Annuity team, and I'm here today to hear about longevity and the impact on bulk annuity pricing from Matt Richards at Pension Insurance Corporation.

So, life expectancy over the last few years there have been reports that it's shortening, perhaps due to economic issues or issues with the provision of healthcare to large numbers of people retiring. What are your views on this?

Matt Richards: I think I totally agree that we have seen a reduction in life expectancies at the long end. And the CMI have published tables over the last few years which I'm sure you've seen, that have shown that expectancy has reduced. We might be seeing a slight reversal of that over the last year or so where it's starting to increase again. But that does tend to feed through into insurer pricing, as I'm sure you know. When we're looking at how we consider the pricing for bulk annuity deals, we need to work out whether we take a view on longevity.

We're basically hedging out all of our longevity exposure or to the most point that we can and what we want to do is look how the reinsurers adopt the changes to the CMI tables before we start to adopt them, because that feeds directly through into our pricing.

Harry: And is there anything that schemes could do in the way of provision of data when they come out to market that would help?

Matt: In terms of refining their price, there are a couple of things that you can do depending on size, really. For smaller schemes, trustees want to be thinking about the data that they provided in terms of marital status tracing and making sure that their data is up to date as possible. In terms of larger schemes of several hundred million or more, they might be wanting to look at experienced data and trying to refine their mortality assumptions in their pricing.