Mercer and RMS today announced that Mercer has licensed the RMS Longevity Model™ for the consultancy’s U.K. pension clients. The model will enable Mercer’s pension risk management consultants to quantify how future advances in medicine and medical procedures could impact people’s lifespans and the subsequent implications for pension scheme liabilities and company finances.
Forward-looking longevity modeling helps pension schemes to better understand and then manage the uncertainty around the future life expectancy of both their current and future pensioners.
Pension schemes are increasingly looking to protect themselves from potential shortfalls in their funding levels and to do this they need realistic and detailed future longevity scenario analyses,” said Sofia Ben El Attar, Director, LifeRisks at RMS. Empowering our clients to understand longevity risk in real world terms and derive actionable insights for their pension scheme clients is one of the unique aspects of our Longevity Risk Model. It helps to underpin confidence among pension trustees and employers.”
In contrast to typical longevity models that rely solely on projecting historical mortality trends into the future, the RMS Longevity Model is forward-looking, using more realistic trajectories in life expectancy in the decades to come. The model couples analysis of historical patterns with insight on potential drivers of longer lifespans such as medical breakthroughs in cancer treatment and healthier lifestyles, thus reducing the uncertainty around future mortality projections.
Michael Kelly, Principal at Mercer said: “As interest rates have declined, defined benefit pension liabilities have been become increasingly sensitive to rising life expectancy assumptions. In recent years many pension schemes and sponsors have taken steps to reduce their risk exposure to changes in their asset values, interest rates, inflation, and employer covenant. Life expectancy – or longevity – risk is thus growing in significance as an unhedged risk for many schemes and their sponsoring employers.”
Glyn Bradley, Principal at Mercer added: “The more we can understand life expectancy risk the better we are able to deal with it. RMS’ longevity model increases that understanding by linking projected improvements in life expectancy directly back to real world events. It helps clients understand not just what might happen to life expectancy but why that might happen.”
"We are seeing an increased interest in longevity modeling from companies outside the typical users in the insurance industry,” continued Ben El Attar. “Our collaboration with Mercer is an important step in broadening access to both longevity analytics and the latest advances in medical science to a wider range of financial services companies.”
Notes to Editors
RMS is a leading global catastrophe risk management firm and Mercer is a global consulting leader in advancing health, wealth and careers, and a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC).
The RMS UK Longevity Model was developed by a team including experts in epidemiology, mathematical biology, genetics, biostatistics, financial engineering, public health policy and medical science. It is continuously updated with the latest data on medical research, removing the onus on clients to keep up with scientific developments.
RMS models and software help financial institutions and public agencies evaluate and manage catastrophe risks throughout the world, promoting resilient societies and a sustainable global economy. Learn more at RMS.com and follow us @RMS.
Mercer is a global consulting leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and careers of their most vital asset – their people. Mercer’s more than 20,000 employees are based in 43 countries and the firm operates in over 140 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global professional services firm offering clients advice and solutions in the areas of risk, strategy and people. With annual revenue of $13 billion and 60,000 colleagues worldwide, Marsh & McLennan Companies is also the parent company of Marsh, a leader in insurance broking and risk management; Guy Carpenter, a leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a leader in management consulting. For more information, visit www.mercer.com. Follow Mercer on Twitter @Mercer. In the UK, Mercer Limited is authorised and regulated by the Financial Conduct Authority.