Swiss coherent mortality model as a basis for developing longevity de-risking solutions for Swiss pension funds: A practical approach

Cheng Wan and Ljudmila Bertschi

Insurance: Mathematics and Economics, 2015, vol. 63, issue C, 66-75

Abstract: Pension funds in Switzerland are exposed to longevity risk possibly to a greater extent than in many other developed economies. The ground for this is a dearth of financial products to combat longevity risk, with a lack of buy-in and very limited variety of buy-out solutions available. The solutions that do exist frequently come at a very high price and many pension funds are in deficit on a buy-out basis. From our point of view creating an approach for evaluating the longevity risk faced by each pension fund and integrating it into dynamic risk budgeting strategies will help Swiss pension funds better understand the mechanism behind different longevity de-risking solutions and decide on the most suitable as well as affordable solution for them. To develop capital market solutions for longevity hedging strategies it is crucial that both hedgers (pension funds) as well as solution providers are able to quantify the longevity risk in the framework of a holistic risk management and to develop an adequate pricing approach.

Keywords: Longevity risk; Stochastic mortality model; Forecast; Robustness; Risk management; The Plat model; The Li–Lee model (search for similar items in EconPapers)
JEL-codes: C11 C18 C22 C51 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:63:y:2015:i:c:p:66-75

DOI: 10.1016/j.insmatheco.2015.03.025

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