Longevity Risk (2nd Edition)
First published:
ISBN: 9781782723882
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Magnitude of the Longevity Issue
Joseph Lu
Magnitude of the Longevity Issue
Foreword
Introduction
Ageing Populations and Changing Demographics
Determinants of Changes in Life Expectancy
Magnitude of the Longevity Issue
Pricing Longevity Risk: Establishing the Base Mortality Level
An Introduction to Credibility Theory
Projecting Future Mortality
Modelling Longevity Risk under a One-Year VaR Framework
Risk Transfer for Pension Schemes
De-Risking Insured Annuity Portfolios
Hedging Longevity Risk through Reinsurance
Commercial Aspects of Longevity Reinsurance
Extreme Mortality Risk as a Natural Hedge?
Capital Markets and Longevity Risk Transfer
Longevity Indices
Longevity Policy Committee
Legal Considerations and Challenges in Longevity Risk Transactions
Pensions and Longevity in the US
Canadian Pensioner Longevity Risk
The Dutch Pensions and Longevity Insurance Market
The population of many industrialised countries, such as the UK, is ageing and living longer. These trends affect the economy, healthcare and provisions for retirement. However, we still have much to learn about the drivers of human longevity and there remains much uncertainty about the future trends of longevity in populations.
This chapter provides an overview of the key sources of longevity risk and the pension schemes and types of insurance products containing longevity risk. In addition, we consider the size of the longevity opportunity or issue and provide our thoughts on how longevity risk may be managed and mitigated going forward. Several of the themes covered in this chapter will be covered in greater detail later in this book.
Financial impact of longevity
Demographic trends in many countries are unambiguous. People in developed countries are having fewer children and are living longer, leading to a rise in the average age within the population, ie, an ageing population. In the Organisation for Economic Co-operation and Development (OECD) countries, for every 1,000 aged 20–64 there were 195 aged 65 and above in 1975. The equivalent figure for age 65 and above
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