New Solutions to an Age-Old Problem: Innovative Strategies for Managing Pension and Longevity Risk

Amy Kessler

North American Actuarial Journal, 2021, vol. 25, issue S1, S7-S24

Abstract: The recent wave of innovation in the pension and longevity risk transfer market is barely a decade old, but more than U.S. $470 billion in global transaction activity has taken place, mainly in the United Kingdom, the United States, Canada, and the Netherlands. The main deals have been buy-outs, buy-ins, and longevity swaps for pension schemes. Similar derisking solutions have spread to the market for insured annuities. But transactions must be simplified, standardized, and made available to all pension schemes, regardless of size. They must also cover younger deferred scheme participants, as well as those in collective schemes where intergenerational risks are important. New investors must be brought in, and one way of doing this is via sidecars. Capital relief is important in reducing the costs of insurance-based solutions, such as those involving tail-risk protection; regulators need to become more comfortable with such deals.

Date: 2021
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DOI: 10.1080/10920277.2019.1672566

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