Insurers are better placed to pool and manage longevity risk than pension schemes, according to Ash Williams, risk settlement partner at XPS Group.

Speaking on a panel at the XPS Group’s 2025 Pensions Conference, Williams explained that insurers have three tools in their box when it comes to managing longevity risk.

Longevity risk is the chance that life expectancies and survival rates exceed expectations, resulting in greater-than-anticipated cash flow needs on the part of insurance companies or pension funds.

Williams said insurers could manage longevity risk by reinsurance, natural hedges and risk pooling.

“[Insurers] have the way they have built their liability from the outset. They can write insurance products that provide some natural hedges,” he explained.

He said each individual insurer will do things in different ways but Williams said insurers tended to manage this risk a lot better than pension schemes.

For other schemes, you can still mitigate the risk; you just have to do it a different way, perhaps through funding
Tom Froggett, XPS

Also appearing on the panel, Tom Froggett, head of DB run-on solutions at XPS, said the data modelling around life expectancies and the way that longevity trends are emerging, was better than it has ever been.

He said: “For example, if we look at our data pool that we run with more than a million DB members across the country.

“Frankly, there were times during Covid where it felt like we had a better idea what was going on than the government.

“We have a very good idea of baseline estimates and emerging trends and can react to those.

“Of course, measurement on its own is not enough. You still need to mitigate risk.

“For the larger schemes, longevity hedges and longevity swaps are still available. But for other schemes, you can still mitigate the risk; you just have to do it a different way, perhaps through funding.”

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