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ARC Sessional: Still Living with Mortality: The Longevity Risk Transfer Market after One Decade

Monday 29 January 2018 17:00 - 20:00

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This paper updates Living with Mortality  written more than a decade ago. It describes how the longevity risk transfer market has developed over the intervening period, and, in particular, how insurance-based solutions – buy-outs, buy-ins and longevity insurance – triumphed over the capital markets solutions that were expected to dominate at the time.

 

Since writing the last paper in 2011, some capital markets solutions – longevity-spread bonds, longevity swaps, q-forwards, and tail-risk protection – have come to market, but the volume of business has been disappointingly low. Our explanation for this centres on how the differences between the index-based solutions of the capital markets and the customized solutions of insurance companies have operational implications – principally in respect of basis risk, credit risk,  regulatory capital, collateral, and liquidity – that have still to be fully resolved. We discuss the importance of stochastic mortality models for forecasting future longevity and examine some applications of these models in terms of measuring and hedging longevity risk, determining the longevity risk premium, pricing a buy-out, and estimating regulatory capital relief. The longevity risk transfer market is now beginning to recognize that there is insufficient capacity in the insurance and reinsurance industries to deal fully with demand and new solutions for attracting capital markets investors are now being examined – such as longevity-linked securities and reinsurance sidecars.  

This paper is part of the Actuarial Research Centre (ARC) Programme Modelling, Measurement and Management of Longevity and Morbidity Risk.

https://www.youtube.com/watch?v=ifXTxMDi0Ng

Event organiser

Contact Events Team for more information.

eventmanagement@actuaries.org.uk

0207 632 1498

Chair
Douglas Anderson

Presenters
Professor Andrew Cairns (Heriot Watt University)
Professor David Blake (Cass Business School)

17.00-17.30 Registration and refreshments
17.30-17.35 Chair's Welcome
17.35-18.20 Still Living with Mortality: The Longevity Risk Transfer Market After One Decade
18.20-18.50 Questions from the floor
18.20-19.00 Chair’s comments and close
19.00 Drinks reception and networking

 

Location

Address

Royal Collge of Physicians, 9 Queen St, Edinburgh EH2 1JQ

Nearest Public Transport

Waverley train station

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