(Source: Shanghai Securities News 2025-03-04)
Promote financial institutions to incorporate ESG into risk control systems and corporate governance frameworks, enrich green financial products and services, and increase the capital market’s support for green and low-carbon development; build and continuously improve a scientific and unified green financial standard system, and form a standardized system for green financial supply based on this; integrate artificial intelligence into Intelligent technology is deeply integrated with financial services to improve the efficiency and quality of financial services; accelerate the exploration of a new risk transfer mechanism for personal pension longevity risks with Chinese characteristics, establish a longevity risk hedging trading market, and promote the implementation of more inclusive pension financial products... Focusing on the "five major articles" of finance, representative members actively provided suggestions and suggestions.
Sun Jie, member of the National Committee of the Chinese People’s Political Consultative Conference and deputy dean of the w88 casino of Insurance at the w88 casino
Sun Jie, member of the National Committee of the Chinese People’s Political Consultative Conference and deputy dean of the w88 casino of Insurance at the w88 casino:
Explore establishing a personal pension
New risk transfer mechanism for longevity risk
◎Reporter Han Songhui
The personal pension system has been fully implemented across the country. How to benefit more people? Sun Jie, a member of the National Committee of the Chinese People's Political Consultative Conference and deputy dean of the w88 casino of Insurance at the w88 casino, recently said in an exclusive interview with the Shanghai Securities News that in the context of falling interest rates and insufficient supply of high-quality assets, financial institutions with pension management experience urgently need to play a role in innovatively developing more pension financial products that provide medium and long-term stable returns.
“We should accelerate the exploration of a new risk transfer mechanism for personal pension longevity risks with Chinese characteristics, establish a longevity risk hedging transaction market, improve the longevity risk management system, and solve the worries of financial institutions in innovating medium and long-term pension financial products, so as to promote the implementation of more inclusive pension financial products.” Sun Jie said.
The development of lifelong benefit pension annuity insurance is limited
Judging from the personal pension products currently launched, my country’s pension financial market is immature, and the advantages of different types of pension products have not been fully utilized.
Sun Jie analyzed that the investment period of personal pensions should be mainly medium and long-term. However, currently, the majority of personal pension products on the market are bank savings and financial management products, accounting for more than 50%. The homogeneity of products is serious, and most funds and financial products are short-term products of 1 to 5 years. In the context of falling interest rates and insufficient supply of high-quality assets, there is an urgent need for financial institutions with pension management experience to innovate and develop more pension financial products that provide medium and long-term stable returns.
Comparing various types of pension financial products, only pension annuity insurance can extend the receiving time to life, that is, lifetime benefit pension annuity insurance, allowing participants to receive a certain pension every year. Sun Jie said that although this is an advantage of pension annuity insurance, this design also brings greater longevity risks to insurance companies. That is, when people's actual life span exceeds their expected life span, it will bring financial risks to pension payers.
"If a longevity risk transfer and diversification mechanism is not established in time, the more insurance companies sell such products, the greater the longevity risks they will bring. For the sake of stable operations, insurance companies are unwilling to develop such products, so there are currently few such products among personal pension products." Sun Jie said.
Establishing a new risk transfer mechanism for longevity risk
So, how to manage longevity risk?
Sun Jie introduced that longevity risk swap is a longevity risk management tool that is widely used in the international market. The main participants are pension insurance companies and reinsurance companies. First, longevity risks should be transferred to large reinsurance companies through traditional reinsurance and swap methods. Second, insurance companies, pension companies and reinsurance companies should then transfer longevity risks to the capital market through new risk transfer tools.
To achieve these two points, government departments need to build a new risk transfer mechanism for longevity risks. Sun Jie said that government departments should provide institutional infrastructure construction and formulate framework rules for longevity risk swap transactions as soon as possible, including the rights and obligations of the parties to the transaction, transaction processes, default handling, etc., to ensure fairness, justice and transparency of the transaction; at the same time, build a risk assessment system for longevity risk swaps to evaluate the risk tolerance of both parties to the transaction to ensure that the transaction is conducted within a controllable range.
At the same time, research and develop new risk diversification tools for longevity risks. "Overseas markets use longevity bonds and index longevity risk swaps to connect longevity risks with social capital, which is also a further extension of longevity swaps." Sun Jie said that through such new risk transfer tools, pension funds and insurance companies can transfer longevity risks to other financial institutions or a wider range of investors to achieve the purpose of diversifying longevity risks.
With the trading framework and financial products, a specialized trading market is also needed. Sun Jie suggested that a longevity risk trading market could be established on the Shanghai Insurance Exchange, allowing insurance companies to issue new risk transfer products in it, and authorizing the Shanghai Insurance Exchange to provide trading services for product issuance, trading and clearing and settlement.
In this process, we must pay attention to the interaction between the longevity risk trading market and patient capital. Sun Jie believes that the longevity risk management mechanism can effectively enhance the stability of the liability side of insurance companies, allowing pension annuity funds to stay more "patiently" in the capital market. When insurance companies put longevity risk management on the agenda, my country's commercial pension annuity insurance market will achieve rapid development, and this will drive long-term investment and patient investment in pension annuities.
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