Living with Mortality: Longevity Bonds and Other Mortality-Linked Securities

David Blake, A. J. G. Cairns and K. Dowd

British Actuarial Journal, 2006, vol. 12, issue 1, 153-197

Abstract: This paper addresses the problem of longevity risk — the risk of uncertain aggregate mortality — and discusses the ways in which life assurers, annuity providers and pension plans can manage their exposure to this risk. In particular, it focuses on how they can use mortality-linked securities and over-the-counter contracts — some existing and others still hypothetical — to manage their longevity risk exposures. It provides a detailed analysis of two such securities — the Swiss Re mortality bond issued in December 2003 and the EIB/BNP longevity bond announced in November 2004. It then looks at the universe of hypothetical mortality-linked securities — other forms of longevity bonds, swaps, futures and options — and investigates their potential uses. It also addresses implementation issues, and draws lessons from the experiences of other derivative contracts. Particular attention is paid to the issues involved with the construction and use of mortality indices, the management of the associated credit risks, and possible barriers to the development of markets for these securities. It suggests that these implementation difficulties are essentially teething problems that will be resolved over time, and so leave the way open to the development of flourishing markets in a brand new class of securities.

Date: 2006
References: Add references at CitEc
Citations: View citations in EconPapers (91)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:bracjl:v:12:y:2006:i:01:p:153-197_00

Access Statistics for this article

More articles in British Actuarial Journal from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().