A research project jointly commissioned by the IFoA and Life and Longevity Markets Association (LLMA) has developed a readily-applicable methodology for quantifying the basis risk arising from the use of population-based mortality indices for managing longevity risk.

Longevity basis risk arises because different populations, or subpopulations, will inevitably experience different longevity outcomes. This is a significant issue for those wishing to hedge longevity risk using a published mortality index – whether they be pension schemes, insurers, reinsurers, or banks.

This work will be beneficial to a wide variety of organisations and individuals, including pension schemes and their members as well as insurance companies, which write annuity business. These and other institutions which are exposed to, or would like to invest in, longevity risk will gain from a new methodology for quantifying risk related to longevity.

Phase 2: 2016/2017

The purpose of Phase 2 has been to:

  • determine the most relevant metrics for measuring longevity basis risk and hedge effectiveness;
  • apply the approach in Phase 1 to realistic worked examples based on appropriate data;
  • present a robust quantification of basis risk to third parties such as regulators; and
  • investigate the potential limitations of the time series processes.

Outputs:

Research commissioned by: The IFoA and the LLMA
Project conducted by:

Macquarie University, University of Waterloo, Australian National University and Mercer Australia

Commenced: 2016
Status: Completed in 2017

Phase 1: 2013/2014

Phase 1 of this research focused on producing a methodology that could be used to quantify longevity basis risk and assess the level of risk reduction that might be brought about through the use of an index-based longevity hedge. It resulted in a framework that recognised the fact that different practitioners will have different portfolios, different volumes and histories of experience data, and different constraints of the models that they can use in practice.

Outputs:

Research commissioned by: The IFoA and the LLMA
Project conducted by:

The Cass Business School, City University, and Hymans Robertson LLP

Commenced: 2013
Status: Completed in 2014

Contact Details

If you have any questions or wish to discuss any aspect of our funding for member-led research please contact the Research and Knowledge Team:

arc@actuaries.org.uk

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Events calendar

  • Spaces available

    Drawing from his most recent book “The New Long Life” and his longevity research Andrew J Scott will outline how longer lives and new technologies will fundamentally reshape how we structure our lives and transform the economy. As well as looking at the agenda this will set governments and corporates he will focus on the implications for you and how you prepare your future career.

  • India Town Hall

    Webinar
    28 January 2021

    Spaces available

    IFoA Immediate Past President John Taylor would like to invite you to the Institute and Faculty of Actuaries’ (IFoA) virtual India Town Hall 2021, hosted by John Taylor with IFoA Council Member Mahidhara Davangere and IFoA Chief Executive, Stephen Mann. 

  • Spaces available

    What are the options for the world economy looking ahead?

    In this Thought Leadership Lecture, Economist, Vicky Pryce, will be discussing world economic trends, including the differences in geographical performance and how output is recovering and where.

  • Spaces available

    Trust and Leadership for Actuaries

    Led by Dr. Jim Baxter, University of Leeds, this webinar introduces some key ideas in the ethics of trust, with a particular focus on those in, or on the path to, leadership roles. Dr Baxter is joined by a panel of experienced leaders who will give their personal perspectives on how they understand the value of trust and how they seek to promote and inspire trust, drawing on their experiences of leadership. The panel includes:

  • Health and Care Hot Topics webinar

    Online webinar
    10 February 2021

    Spaces available

    In this webinar, we have two presentations showing the latest research on the implications for life and health insurers of two key issues: genomics and pandemic risk.

    Dr Peter Joshi and Paul Timmers will share their research on how well-established underwriting processes can allow for genomics in predicting expected mortality and morbidity. They will then discuss the potential for stratified screening and personalised medicine to improve health and reduce claim costs.

  • Spaces available

    As the world’s attention begins to turn to COP26 later this year in Glasgow, Sarah Gordon (Chief Executive, Impact Investing Institute) will share her vision for how the financial services industry can deliver for people and the planet, as well as how to encourage more investment with the intention to generate positive, measurable social and environmental impact alongside a financial return.

  • Sub-Saharan Africa Town Hall

    26 February 2021

    Spaces available

    IFoA Immediate Past President John Taylor would like to invite you to the Institute and Faculty of Actuaries’ (IFoA) virtual SSA Town Hall 2021, hosted by John Taylor with IFoA Council Members Mukami Njeru, Prosper Matiashe and IFoA Chief Executive, Stephen Mann.

  • MENAP Town Hall

    2 March 2021

    Spaces available

    IFoA Immediate Past President John Taylor would like to invite you to the Institute and Faculty of Actuaries’ (IFoA) virtual MENAP Town Hall 2021, hosted by John Taylor and IFoA Chief Executive, Stephen Mann.