Credit Suisse First Boston released the first-ever longevity index today, which it hopes will enable standardised structuring and settlement of longevity risk transfer instruments such as swaps and structured notes.The Credit Suisse Longevity Index (CSLI), available on Bloomberg, will include both historical and futures values referenced against annual official US population data. It will have both male and female data, as well as sub-indexes for attained ages of 50, 55, 60, 65, 70, 75 and 80 years.
The firm expects institutional investors, insurance companies, reinsurance companies and providers of post-retirement benefits to be the primary buyers of swaps indexed to the CSLI, as these institutions attempt to hedge against growing life spans.
The industry has already been hedging against liabilities caused by interest rate and equity price volatility, but the lack of a recognised index has made this more difficult for volatility in longevity.
“By offering market participants a single, transparent reference tool, the index will help spur the development of a liquid, tradable market in longevity risk,” said Jeremy Bennett, managing director and global head of CSFB’s structuring group.
According to data from the dealer, the average mortality rate among has improved by 2.02% annually for men and by 0.95% for women in the US, causing a headache for pension schemes and insurers.
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