NEWARK, Calif. - July 04, 2016 RMS, a leading global catastrophe risk management firm, today announced that the pension practice of KPMG in the U.K. has licensed the RMS Longevity Model™. It means the professional services consultancy will be able to analyze the effect on projected lifespans caused by future medical breakthroughs and changing trends in lifestyle. This will enable KPMG to gauge the risk these advances might pose to the funding levels of pension schemes.
Predicting future mortality rates is a challenge for companies which must plan and manage their ability to pay the benefits due to members who are either retired now, or will reach retirement in the medium and longer term.
Tom Seecharan, Pensions Director at KPMG in the U.K. said: “Our clients are used to getting an understanding of the possible future risks to their Defined Benefit (DB) pension schemes posed by variations in factors such as interest rates and inflation, using precise models. The RMS model now allows them to more fully understand the risk posed by potential changes in longevity too – based on independent analytics developed for the insurance industry, who are perhaps the ultimate financial risk-takers.”
The RMS Longevity Model was originally developed for the life insurance and reinsurance sectors. It provides stochastic simulations of future life expectancy scenarios based on an analysis, which differs from actuarial models. Actuarial models typically used by U.K. pension schemes are essentially retrospective, analyzing historical mortality trends and projecting them forward. In contrast the RMS model looks forwards, into a realistic future, anticipating potential drivers of longer lifespans in the years to come such as healthier lifestyles and medical breakthroughs.
Such breakthroughs might include developments in fields such as stem-cell therapies, nano-medicine, anti-ageing science and personalized treatments for cancers. Thus the RMS model provides additional insight from cutting-edge science, which will offer KPMG clients more realistic trajectories of future longevity.
Sofia Ben El Attar, Director of LifeRisks at RMS said: "To make the right decisions around managing longevity risk it is critical for pension schemes trustees, corporate sponsors, and their advisors to have access to market-leading expertise and analytics to be able to project mortality improvements and determine the best risk transfer strategy for their clients. For example, would an increase in a portfolio’s risk due to the availability of new diabetes and cancer treatments require that clients manage this risk internally or transfer it to a reinsurer? And at what price? By using the RMS longevity scenarios KPMG can help their clients understand the potential impact of any new medical advances on their funds as a first step in deciding what actions would best mitigate that increased risk.”
Notes to Editors
The RMS U.K. Longevity Model was developed by a team including experts in epidemiology, mathematical biology, genetics, biostatistics, financial engineering, public health policy and medical science.