PLSA AC 2020: Impact of Covid-driven mortality on DB liabilities expected to be ‘very limited’

The impact on defined benefit (DB) pension scheme liabilities from Covid-19 mortality is likely to be “very limited”, Pensions Insurance Corporation (PIC) longevity actuary, Jamie Funnell has said.

Speaking at the PLSA Annual Conference 2020, Funnell pointed to the LCP estimation that the impact would be less than 0.25 per cent, which he said suggested there were other, more important drivers at this time, given the volatility in financial markets.

Some of these factors have been beneficial to buy-in and buyout pricing, noted Funnell, which has “remained robust” during the pandemic.

Funnell urged the industry not to overreact to the increased mortality due to Covid-19, as the risk of people living longer than expected has not "suddenly disappeared".

“It is still a serious risk and the elevated levels of healthcare spending, for example, we have seen during the pandemic may well have a positive impact in the longer term,” he added.

Funnell also stated that, as the pension reinsurance market grows, there is potential for technology to drive efficiencies in the sector.

The main area cited was in the ability to get reinsurance for smaller schemes, with Funnell highlighting automation as a possible solution to the “significant” effort needed to price reinsurance.

He also emphasised the importance of making sure scheme data was clean and easy to use, which he expected technology to be able to help with.

Finally, Funnell noted that although there were challenges posed the capacity of the buy-in and buyout market, they were not “insurmountable” due to the ability to raise capital in the current economic environment.

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