Update on Dutch Longevity and Longevity in Het Nieuwe Pensioenstel André de Vries VP, Business Development, Global Financial Solutions, EMEA De Actuarisdag 2017 - Zeist - September 26, 2017
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Dutch Longevity Developments 3
Recent Mortality Trends: England & Wales Source: RGA analysis of ONS data 4
Recent Mortality Trends Other Countries Source: HMD data, RGA analysis 5
Netherlands Mortality Improvements - Male For different ages 8% 6% - - 17 19 1991 1993 Age 55 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 8% 6% - - 17 19 Age 65 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015-6% -8% Quasi AC P-Spline Crude 1 yr Crude 3 yr avg -6% -8% Quasi AC P-Spline Crude 1 yr Crude 3 yr avg 8% 6% - - 17 19 1991 1993 1995 1997 Age 75 1999 2001 2003 2005 2007 2009 2011 2013 2015 8% 6% - - 17 19 1991 1993 Age 85 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015-6% -8% Quasi AC P-Spline Crude 1 yr Crude 3 yr avg -6% -8% Quasi AC P-Spline Crude 1 yr Crude 3 yr avg Source: HMD and CBS database 6
Netherlands Mortality Improvements - Male For different calendar years 8% 6% Year 2012 8% 6% Year 2013-52 54 56 60 62 64 68 72 76 80 84 88 92 96-52 54 56 60 62 64 68 72 76 80 84 88 92 96 - -6% -8% Quasi AC P-Spline Crude 1 yr Crude 3 yr avg - -6% -8% Quasi AC P-Spline Crude 1 yr Crude 3 yr avg 8% 6% 8% 6% Year 2015-52 54 56 60 62 64 68 72 76 80 84 88 92 96-52 54 56 60 62 64 68 72 76 80 84 88 92 96 - -6% -8% Year 2014 Quasi AC P-Spline Crude 1 yr Crude 3 yr avg - -6% -8% Quasi AC P-Spline Crude 1 yr Crude 3 yr avg Source: HMD and CBS database 7
Netherlands Mortality Improvements - Male Smoothed improvements for different calendar years (1992 to 2016) 5% 3% 1% -1% 52 54 56 60 62 64 68 72 76 80 84 88 92 96 1992 1993 19 1995 1996 1997 19 5% 3% 1% -1% 52 54 56 60 62 64 68 72 76 80 84 88 92 96 19 1999 2000 2001 2002 2003 2004 5% 3% 1% -1% 52 54 56 60 62 64 68 72 76 80 84 88 92 96 2004 2005 2006 2007 2008 2009 2010 5% 3% 1% -1% 52 54 56 60 62 64 68 72 76 80 84 88 92 96 2010 2011 2012 2013 2014 2015 2016 Source: HMD and CBS database 8
62 Netherlands Mortality Improvements - Male -1%- 5% 3% 1% -1% 54-1% 1%- -3% 3%- -5% 17 19 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Source: HMD and CBS database 9
Netherlands and UK Mortality Improvements - Male Smoothed improvements for different calendar years (2004 to 2016) 5% 3% 1% -1% NL 52 54 56 60 62 64 68 72 76 80 84 88 92 96 2004 2005 2006 2007 2008 2009 2010 5% 3% 1% -1% NL 52 54 56 60 62 64 68 72 76 80 84 88 92 96 2010 2011 2012 2013 2014 2015 2016 5% 3% 1% -1% UK 52 54 56 60 62 64 68 72 76 80 84 88 92 96 2004 2005 2006 2007 2008 2009 2010 5% 3% 1% -1% UK 52 54 56 60 62 64 68 72 76 80 84 88 92 96 2010 2011 2012 2013 2014 2015 2016 Source: HMD, ONS and CBS database (UK = England and Wales) 10
62 England and Wales Mortality Improvements - Male -1%- 5% 3% 1% -1% 54-1% 1%- -3% 3%- -5% 17 19 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Source: HMD and CBS database 11
62 Netherlands Mortality Improvements - Male -1%- 5% 3% 1% -1% 54-1% 1%- -3% 3%- -5% 17 19 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Source: HMD and CBS database 12
Transfer of Longevity Risk 13
Decomposing Longevity Risk q x Volatility q x Starting Mortality q x Mortality Improvements time age age 14
Main Challenge in Transferring Longevity Risk Price can often be decomposed in three parts: 1. Starting Mortality Rates 2. Mortality Improvement Rates 3. Compensation for Capital and Costs Actual versus Perceived Costs: Catch-Up Premium Premium - Periodic Cash Flow under Longevity Swap Actual Costs Catch-Up Premium Perceived Costs 15
Longevity Indemnity Reinsurance Longevity Swap Indemnity reinsurance contract, but swap is helpful analogy Premiums = Expected Annuities + Loading ( fixed ) Benefits = Actual Annuities ( floating ) based on survival of annuitants Policyholders Actual Annuities (floating) Ceding Company Expected Annuities + Loading = Premiums (fixed) Actual Annuities = Benefits (floating) 16
Cash Flows under Longevity Reinsurance (Swap) Impact of different mortality scenarios 100.000 80.000 Paid by RGA 60.000 40.000 20.000 0-20.000-40.000-60.000-80.000-100.000 2018 2023 2028 2033 2038 2043 2048 Premiums Expected Benefit Payments Benefits in case of -2 mortality rates Benefits in case of +2 mortality rates Net Cash Flow in case of -2 mortality rates Paid by Cedant Net Cash Flow in case of +2 mortality rates 17
Shorter Term Longevity Solution 1000 1. Future Value of Past Annuities 2. Present Value of Future Annuities 0 800 0 600 Best Estimate Annuities Higher Mortality Lower Mortality 0 400 300 200 100 0 0 5 10 15 20 25 30 35 Risk Cover Period Future Years 18
Cover of Mortality Development Defining Attachment and Detachment Points Three examples Longevity Benefit Attachment Points Detachment Points LSA 1 LSA 2 LSA 3 5% 1 15% 2 25% 3 Cumulative Change in Mortality Rates Best Estimate Mortality Reducing Impact of Catch Up -Premium but also of Capital Benefit 19
Mortality Rates for Attachment and Detachment Point Scenarios during Risk Cover Period; Mortality Projection beyond Risk Cover Period 0,00 Calibration Period Realized Best Estimate Start Estimate Start SII Longevity Shock (full term) Attachment Point Detachment Point Attachment Point (in sample) Detachment Point (in sample) 0,0045 0,0040 0,0035 0,0030 0,0025 15% 15% 0,0020 5% 5% 0,0015 0,0010 0,0005 Risk Cover Period 2051 2049 2047 2045 2043 2041 2039 2037 2035 2033 2031 2029 2027 2025 2023 2021 2019 2017 2015 2013 2011 2009 2007 2005 2003 2001 1999 1997 1995 1993 0,0000 20
Langlevenrisico in Het Nieuwe Pensioenstelsel 21
Macro-langlevenrisico := Risico dat gehele populatie ouder wordt dan verwacht Impact schok macro-langlevenrisico op pensioeninkomsten Bron: Willis Towers Watson (SER Verkenning Mei 2016, figuur 2.1, p29) 22
Beheren van Macro-langlevenrisico Verschillende mogelijkheden voor beheren van langlevenrisico: 1. Externe herverzekering 2. Ruilen (swap) binnen het collectief Tot welke leeftijd? Hoogte van de premie? [Maximum dekking?] 3. Uitsmeren in de tijd Levensverwachtingsaanpassingsmechanisme (LAM) Of combinaties? 23
Combineren van verschillende mogelijkheden? Herverzekeren, Ruilen en/of Uitsmeren Voorbeelden van combineren: Herverzekeren (gedeelte) van gepensioneerden? Ruilen of uitsmeren met een maximum en dan restant herverzekeren? Gedeeltelijk herverzekeren om premie vast te stellen? Andere combinaties? 24
Bedankt voor jullie aandacht! Vragen, opmerkingen, feedback? André de Vries adevries@rgare.com 25
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