Core Insights - Longevity is a significant indicator of social progress and development, but managing and diversifying longevity risks presents new challenges for society [1] - Longevity risk refers to the financial pressure arising from individuals or groups living longer than expected, impacting pension and insurance obligations [1] - The commercial annuity insurance market, a tool for hedging longevity risk, faces substantial challenges due to the accelerating aging trend and interest rate changes [1][2] Group 1: Longevity Risk Overview - As of the end of 2024, the elderly population aged 60 and above in China is projected to reach 310 million, accounting for 22% of the total population [1] - The dependency ratio for the population aged 65 and above is 22.8%, indicating a growing financial burden on the working-age population [1] - The insurance industry is urged to adopt a multi-faceted approach to address longevity risk, including precise pricing and risk management [2] Group 2: International Practices and Innovations - In the UK, pension plans hold over £3 trillion in assets and are exploring de-risking solutions, with the market for risk transfer transactions expected to reach £70 billion by 2025 [3] - The concept of longevity risk swaps, where direct insurers transfer longevity risk to reinsurers, has been practiced in Europe since the mid-2000s [3] - Hong Kong's insurance industry is developing Insurance-Linked Securities (ILS) to transfer low-frequency, high-loss risks to the capital market [4][5] Group 3: Challenges and Recommendations for China - China faces challenges in implementing longevity risk transfer tools, including data availability, regulatory environment, and market maturity [7] - Recommendations include establishing a mortality index, conducting pilot programs under regulatory sandboxes, starting with simpler products, and fostering a supportive market ecosystem [7] - The development of a mortality improvement rate prediction model tailored to China's data characteristics is underway, which is crucial for managing longevity risk [8]

Core Viewpoint - Longevity is a significant indicator of social progress and development, but managing and diversifying longevity risks presents new challenges for society [2]. Group 1: Longevity Risk Definition and Challenges - Longevity risk refers to the risk of individuals or groups living longer than expected, leading to increased long-term payment obligations for pension and insurance institutions, thereby causing financial pressure [2]. - China has entered a moderately aging society, with the elderly population (aged 60 and above) reaching 310 million by the end of 2024, accounting for 22.0% of the total population [2]. - The commercial annuity insurance market, as a tool for hedging longevity risk, faces significant challenges due to the accelerated aging trend and the combined impact of longevity risk and interest rate changes [2]. Group 2: Long-term Insurance Business Challenges - The long-term insurance business is a core functional area for the insurance industry in addressing population aging, but it faces major challenges such as interest rate risk in a low-interest environment [3]. - The insurance industry must adopt a multi-faceted approach to manage risks associated with mortality, expense, and interest rate differentials, including precise pricing and risk management [3]. Group 3: International Practices in Longevity Risk Management - Mature markets like the UK are actively exploring pension de-risking solutions, with an expected market risk transfer transaction volume of £70 billion by 2025, including £50 billion in longevity co-insurance transactions [4]. - The concept of longevity risk swaps, where direct insurers transfer longevity risk to reinsurers, has been practiced in Europe since the mid-2000s [5]. Group 4: Local Exploration of Longevity Risk Diversification - In China, the exploration of financial tools for transferring longevity risk faces challenges such as data availability, regulatory environment, and market structure [7]. - Recommendations for improving longevity risk transfer in China include establishing a mortality index, conducting pilot projects under regulatory sandboxes, and developing simpler products to ease pricing and execution difficulties [7]. Group 5: Academic and Market Developments - The rapid aging process in China is pushing longevity risk to the forefront of actuarial considerations, with new models being developed to predict mortality improvements [8]. - The Shanghai International Reinsurance Registration Center is working on building a longevity risk index to support reinsurance transactions and product innovation [8].