The retirement savings gap is projected to reach a combined USD 483 trillion across the world’s biggest markets by 2050, up from USD 106 trillion in 2022.

Life savings premiums is estimated to grow to USD 4.0 trillion globally in 2033, from approximately USD 2.3 trillion in 2022 as the responsibility for retirement saving shifts from pension systems to individuals.

Reinsurance can support the life sector to optimise in-force portfolios and write new products. It enhances their underwriting capacity and helps them focus on product innovation for capital-light growth. The report identifies six possible reinsurance structures that can stabilise balance sheets, reduce earnings volatility, and increase capital efficiency.

Global retirement savings gap to increase to USD 483 trillion by 2050

• Responsibility for retirement savings is shifting rapidly to individuals as longer life expectancies and thus time spent in retirement challenge the funding of pension systems.
• Swiss Re Institute estimates that the retirement savings gap, combining government, employer, and individual pension savings, is estimated at USD 106 trillion for eight major economies (Australia, Canada, China, India, Japan, the Netherlands, UK, and the US) in 2022. This figure represents 270% of the combined Gross Domestic Product (GDP) of these countries.
• This gap is growing fast: it is expected to reach USD 483 trillion by 2050, amounting to approximately USD 450,000 per capita in the UK and the US, based on current demographic trends, saving rates, retirement laws, and expected income growth.
• In advanced markets like Japan and the US, the gap is expected to grow annually by 2.5% and 4.7%, respectively. This expansion is faster in emerging markets such as China and India, at 7% and 10% annually, due to rapid population ageing, the growing middle class and their expected retirement income, and large informal sectors (particularly in India).

Strong forecasted growth in life savings premiums indicates opportunity for life insurers to become a lifeline for global retirement preparedness

• Strong growth in the life savings market is expected as a growing global middle-class adopts retirement planning and incomes rise in emerging markets.
• Life savings premium growth is expected to be much higher in the next decade than over the last 20 years.
  • The life savings market is anticipated to expand with a predicted growth from USD 2.3 trillion in savings premiums (2022) to USD 4.0 trillion by 2033.
  • This reflects a 2.7% average annual growth rate.
• The current higher interest rate environment is likely to enhance life insurance profitability, allowing the sector to finally meet its cost of capital again counteracting more than a decade of losses.

Reinsurance can help life businesses harness the opportunities by optimising their in-force portfolio, developing new savings product, and increasing their agility to grow competitively

• Reinsurance can be used as a strategic tool to help life insurers harness the opportunities from expected increase in life savings premium growth by freeing up insurers’ capital, boosting their underwriting capacity, helping them focus on product innovation, and reducing stresses introduced by higher interest rates etc.
• The report highlights six reinsurance structures that can be tailored to insurers’ specific needs, focusing on three areas:
  • Asset-liability management (ALM)
  • Capital and liquidity management
  • Underwriting risks and opportunities
• These reinsurance structures can help insurers stabilise their balance sheet, reduce earnings volatility, and increase capital efficiency. In doing so, this also offers life insurers the agility to anticipate consumers’ needs and tap into new opportunities in the retirement saving market.

Jonathan Graham, Head of Financial Markets & Inforce Management, L&H RI, Swiss Re: “The growing private retirement savings market can represent a 65% increase in new business premiums compared to the past two decades. As reinsurers, our goal is to help our clients seize this opportunity and help narrow the retirement savings gap. This can be done in many ways, for instance, by co-developing competitive index-linked products, which are relevant for the accumulation and decumulation phases, or by leveraging our structured solutions capabilities to optimise our clients’ in-force portfolios while stabilising their balance sheets, reducing earnings volatility and increasing their capital efficiency.”

Read the report.

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