Increasing life expectancy, paired with shifting demographics, regulatory capital pressure, volatile market conditions and new investment opportunities has transformed longevity risk from something of a static actuarial assumption into a dynamic capital management challenge and opportunity. While the pension risk transfer market dominates headline volumes, the underlying challenge is broader: How are life insurers, reinsurers, and corporate sponsors reshaping their balance sheets, modelling capabilities, and risk transfer strategies to handle unprecedented longevity exposure? Greg Winterton spoke to Mitchell Schepps, Senior Managing Director at Aon, to get his views on the current state of the longevity architecture in the US.
GW: Historically, regulatory capital rules made longevity risk less of a central focus in the US than elsewhere. Is that now changing as carriers seek greater capital efficiency and earnings stability?
MS: In the US, longevity reinsurance has remained relatively limited, largely because regulatory capital requirements have historically been lower than in markets operating under frameworks such as Solvency II. As annuity liabilities continue to grow, insurers are placing greater emphasis on balancing capital efficiency, earnings stability and risk management. Longevity risk is becoming a more prominent consideration in those decisions.
GW: As longevity risk transfer transaction volumes grow, how stable is traditional reinsurance capacity? And are insurers actively needing to seek out alternative capital to get deals done at competitive pricing?
MS: We continue to see ample capacity in the traditional reinsurance market. Longevity exposure can provide diversification for mortality-focused portfolios, making it an attractive risk for reinsurers to assume. While alternative capital may play a larger role over time, most activity today is focused on structuring transactions that make effective use of available reinsurance capacity and align pricing with insurers’ objectives.
GW: When managing liabilities that span several decades, how are advancements in data and modelling changing the way insurers make strategic risk transfer decisions as opposed to just offloading risk wholesale?
MS: This is becoming a real differentiator. The goal is not simply to cede longevity risk, but to identify which risks create the most volatility and transfer them at the most efficient cost. Better data, faster modelling and more granular scenario testing allow insurers to design reinsurance solutions that are both more capital-efficient and more strategically targeted.
GW: Beyond institutional pension de-risking, where do you see the greatest opportunity for life insurers to help individuals access reliable lifetime income without overexposing the insurer to unmanageable risk?
MS: Insurers are continuing to expand product offerings to address growing demand for retirement solutions that provide growth potential, downside protection and dependable income. One of the largest opportunities is helping retirees convert a portion of their 401(k) and IRA assets into guaranteed income streams. Products that combine flexibility with durable lifetime income features are well positioned to meet consumer needs while supporting prudent risk management.
GW: As the line blurs between traditional life insurers and alternative-capital-backed carriers, competitive dynamics in the annuity market are changing rapidly. Beyond attractive product pricing, what structural capabilities and capital strategies will distinguish the market winners over the next decade?
MS: Success in today’s annuity market requires more than attractive pricing. Carriers also need a thoughtful asset strategy, strong governance and access to the right partners. Nearly every successful player is using reinsurance, asset-management relationships or both to access alternative assets and improve competitiveness. The winners will be those that pair that capital efficiency with disciplined underwriting, transparent governance and a clear view of long-term risk.
Mitchell Schepps is Senior Managing Director at Aon
