Longevity risk: A new global market?

Abstract

This paper discusses the potential new global market for longevity risk. It outlines how uncertainty over longevity, low investment returns and greater accounting disclosures have created a large demand for hedging longevity risk. It quantifies the size of UK and world exposure to this risk and describes the various parties affected by the risk. It goes on to discuss possible counterparties to the risk and determines that only the investment community has the capacity to accept a significant proportion of the liability. Finally, it discusses methods and instruments that may be used to trade the risk before offering conclusions.