Longevity Risk (2nd Edition)
First published:
ISBN: 9781782723882
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Risk Transfer for Pension Schemes
Michael Anderson and James Mullins
Risk Transfer for Pension Schemes
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 market for longevity risk transfer from defined-benefit pension schemes has shown considerable growth over time. The degree of innovation in products offered has also increased markedly, along with the number of market participants. Globally, the UK has seen the most activity up to the time of writing, along with the lion’s share of market innovation. This chapter therefore focuses mainly on the UK, given that it represents a well-developed, well-functioning market with many examples to draw on. However, we believe that all the themes we cover are also relevant to other countries. Material levels of pension risk transfer have also been observed in other parts of the world (particularly the US and Canada) as set out in Chapter 3, and these markets are likely to continue to develop over time.
This is against a backdrop of declining provision of defined-benefit pension plans, as the increasing costs and the risks to which they expose sponsoring companies make them less attractive. This has led to a greater number of such schemes closing to new members and ceasing further accrual of benefits. Ceasing accrual changes the emphasis in running these schemes from providing an
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