In 1950, the life expectancy for an American man was 65 years. Today, it is 75. Poll the public and most would agree that the increase is a great leap forward for humankind. But for those organizations that have handed out pensions, this rise also means that they have a major unfunded liability on their balance sheets, according to a recent report on human longevity from reinsurer Swiss Re.
The study suggests that these budgeting shortfalls may not be something most employers are equipped to evaluate. The factors contributing to life expectancy may be beyond the purview of the average financial department. Medical experts, actuaries and demographers, for example, all contributed to this report, highlighting the complexity of this emerging risk.
One conclusion reached in Swiss Re's "short guide to longer lives" is that employers should start to consider whether or not it makes sense to transfer the risk to a third party that is better positioned to analyze the numbers. And soon. Because the U.S. Census Bureau projects that, by 2050, the life expectancy of an American man will be 83. And if aging ever does prove to be just another disease that can be cured, as some scientists have claimed, perhaps the whole notion of giving out life-long pensions may need to be rethought altogether.
Longer Lives, Larger Liabilities
|