Annuities sales in the United States have reached their highest levels, surpassing all previous records, with the United Kingdom experiencing a similar trend in life-saving product sales, following a similar trajectory, Swiss Re has revealed.

This presents a vital opportunity to reduce the pensions gap, analysts highlight. At the same time, they warned that savings products are not a solution and advised that re/insurers should focus on creating financial products tailored to meet individual’s various life stages.

Paul Murray, CEO Swiss Re Life & Health Reinsurance, said: “Interest rate hikes initiated to counter post-pandemic inflation have meant higher returns on life savings and annuity insurance products in many places, providing more options for reliable retirement income combined with the traditional protection that comes with insurance cover.”

He continued: “After the low-interest environment that dented annuities’ appeal in recent decades, it’s encouraging to see them having regained their spark as a means of helping people prepare for life beyond work. But the impact on life insurers is significant too.

“Some have restarted dormant annuity businesses, for good reason. Over the next decade, we predict life insurers will generate USD 1.5 trillion of additional savings premiums, with total savings premiums reaching USD 4 trillion by 2034.”

Despite a surge in popularity, this is not a solution, Swiss Re highlighted. The estimated retirement savings gap remains significant; eight of the world’s largest economies face a retirement savings gap of USD 106 trillion in 2022.

According to Murray, this gap is anticipated to widen, potentially quadrupling by 2050.

“Today’s insurance savings products are a partial antidote, but people will need additional options to shore up their finances for the long haul. With life insurers already managing an estimated USD 6 trillion in pension funds globally, our industry has the knowledge and scale needed to contribute in a variety of ways,” Murray stated.

Against this backdrop, the CEO emphasises the need for re/insurers to prioritise the creation of financial products tailored to the diverse goals of individuals as they navigate various life stages.

He said: “People are looking for uncomplicated products that can not only help them with rising medical bills and cover needs as they age, but also offer the peace of mind that comes with steady income beyond retirement.

“With our knowledge of mortality, disability and longevity risk, it is possible to create flexible, fit-for-purpose products that can be adapted or converted based on evolving circumstances and needs.”

Murray added: “One example is combining life insurance protection with a cash value component and long-term care benefits that flexibly adjust based on investment returns and age-related life stage. But we must also consider younger people, who have grown up in an era when a changing climate is a central concern, and may place sustainability criteria at the centre of retirement saving decisions. Insurance savings products that reflect this may win favour among Gen Z and Millennial insurance buyers embarking on their own journeys toward retirement.”

By educating potential retirees about their financial options during their working years, re/insurers can also foster the basis for stable societies while at the same time contributing to the development of a robust customer base for savings and protection products in the future.

He concluded: “Beyond using industry channels to expand financial literacy, we should work with policymakers to integrate courses into education curriculums. We should transform the way insurance topics are communicated to underserved groups, including women, to expand access to protection beyond what have long been viewed as traditional insurance buyers.”

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