Longevity: Opportunity or flop?

Pension schemes are sitting on a huge amount of longevity risk, and capital markets investors could provide a home for this exposure. It looks like a tempting opportunity for bank intermediaries – but many dealers have tried and failed. Tom Osborn reports

Andrew Reid, Deutsche Bank

Banks have never been particularly shy about pushing into new, potentially lucrative business lines – and the longevity swaps market looks a lot juicier than many others. Life expectancy has been rapidly rising in the developed world, leading many pension providers to re-evaluate their mortality assumptions. The stakes are high – even a relatively small error can have massive consequences. According to one estimate, everyone getting it wrong by one year could end up costing between $450 billion