Tony Cheng, RGA CEO: Americans are living longer – which increases the risk for insurers – but the real risk is that people are outliving their savings.

But the issue also raises questions for companies involved in community well-being and lifespan, specifically health and life insurance providers. American Reinsurance Group (RGA) sees this more broadly, and provides the financial framework for the consumer-facing insurance industry.

Longer lifespans may change the shape of the sector and its cash flow in the future, but it remains positive news for the industry, RGA CEO Tony Cheng said.

He noted that RGA is exposed to multiple aspects to seniors, as the company not only reinsures mortality – that is, paying out if someone dies – but also longevity risk, if someone lives longer than expected.

Those ages only ring higher. According to the data Research agencies include the Peterson Healthcare Center and KFF, Life expectancy in the United States has changed A significant rise – with a decline during the Covid pandemic – over the past 30 years. In 1990, for example, the average American was 75 years old. By 2022, their number had reached 78, and nearly 79 before the coronavirus outbreak.

The story is clearer among countries similar to the United States, for example, the G7 countries. The average life expectancy in these countries in 1990 was 77 years, rising to 82.5 by 2022.

Improving life expectancy may cause consumers to feel more confident about their health prospects, thus reducing the need for insurance. This in turn means that RGA customers will see a decline.

But Cheng said he didn’t see the dominoes falling, that much is clear luck In an exclusive interview: “I don’t think people will buy less life insurance because they might think they’ll live longer – which we hope they will. People have more pressing needs in terms of life insurance.

“If they get hit by a car or something unfortunately, they have to pay off the family’s mortgage.”

He continued: “On the longevity side, what can be discovered — and what I think will happen one day — is a stronger consumer awareness that people unfortunately may outlive their savings. That’s scary.”

Cheng added that this realization is likely to come “very slowly” and “perhaps too late.” “If government budgets expand further, the amount you can get from government one would think would be less over time, hence the need for more private financing.”

“So this realization is an insurance gap, what I would call the longevity insurance gap, that we educate about but people (will) Instead take a lump sum Usually they will receive a pension for the rest of their lives. “This is a human trait.”

When will it drop a penny?

the The reality of individuals outliving their savings— and is likely to lean more against the state as a result — is not a new concern for business leaders exposed to this issue.

For example, BlackRock promotes pension and retirement products in order to help people save more effectively when they stop earning money.

As Larry Fink, CEO of the global investment management firm, said earlier this year: “One of the fundamental problems in America is that retirement is not a bad problem for senior people.” Fortune 500 Companies. We provide adequate support to our employees so that they receive a suitable retirement.

“And beyond that, we refuse to talk about how we expand our economy by getting more Americans involved. That’s why we have to have a conversation in Washington, and this must be seen as a national priority and a national promise for all Americans.”

In fact, the man is worth $1.2 billion per ForbesHe argued last year that younger generations are more “economically anxious” because they fear the system they will be left in. “They think my generation — the baby boomers — focused on their financial well-being at the expense of those who come after them. And in retirement, they’re right,” Fink said.

Cheng believes that the realization of the need to prepare financially for retirement will happen “gradually” with stimulation from the government, the private sector and consumers.

“There are many parts of the ecosystem that need to work before it can be effective,” Cheng said. “I would say… Retirement awarenessIt is likely to be the wealthiest, so the disadvantaged may still be dependent on the government.

He continued: “The government has to educate, and consumers have to listen and learn. And business is clearly the big driver.”

“But if the consumer or distributors aren’t really educated or don’t want to, it’s going to be difficult.”