A grim year for deaths in 2018 could see insurers flush with cash as they release reserves earmarked for paying incomes to pensioners.
According to analysts at Royal Bank of Canada (RBC) Capital Markets 2018, was “the worst year for deaths this millennium” with a prediction that the soon-to-be-published mortality tables used by UK insurers will show the largest-ever reduction in UK life expectancy.
RBC predicts that the 2018 mortality table produced by the Continuous Mortality Investigation will show a life expectancy reduction of seven months for men and six months for women, with a 65-year-old man now expected to live to 86.6 and a 65-year-old woman expected to live to 88.6.
Insurers that sell annuities are expected to benefit as they will be able to release cash earmarked for paying out to pensioners, so-called mortality releases.
Insurers Aviva, Just Group and Phoenix will adopt the 2018 mortality table for their 2019 results with RBC predicting mortality releases of £1.112bn, £161m, and £179m respectively in their results next year.
The insurers, which report their 2018 results in the coming weeks, are also predicted to include significant mortality releases in their upcoming results, triggered by a two month drop in life expectancy in the 2017 mortality tables.
RBC predicts mortality releases for Aviva of £275m, Just Group of £48m, Legal & General of £368m and Phoenix of £100m.
Life expectancy had improved up until 2011, but has since slowed dramatically with cardiovascular disease and dementia the key causes.
RBC analyst Gordon Aitken and said it is “not a short term trend like flu, it is longer term trends like dementia and what is going on with heart attacks and strokes.”