The Cost of Longevity Risk Transfer by Capital Solution De-risking Strategy

Maria Carannante (), Valeria D’Amato () and Massimiliano Menzietti ()
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Maria Carannante: University of Naples Parthenope, Department of Management and Quantitative Sciences
Valeria D’Amato: Sapienza University of Rome, MEMOTEF Department
Massimiliano Menzietti: University of Salerno, Department of Economical and Statistical Sciences

A chapter in Mathematical and Statistical Methods for Actuarial Sciences and Finance, 2024, pp 74-79 from Springer

Abstract: Abstract In this paper, we develop a longevity swap de-risking strategy to mitigate the impact of the longevity risk related to payments that depend on how long individuals are going to live. In order to ensure the development of an effi-cient capital market for longevity risk transfers, the longevity hedge would allow longevity risk to be shared efficiently and fairly between the parties. Our results show that the fixed proportional risk premium that the counter-party requires to take on the longevity risk varies by changing the mortality model adopted to represent the evolution of the longevity of the population underlying the swap and that, as the risk premium changes, the total transfer of longevity risk may become inefficient.

Keywords: longevity risk; de-risking strategy; longevity swap (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-64273-9_13

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DOI: 10.1007/978-3-031-64273-9_13

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