In the past year, writing about longevity risk has become increasingly popular, whether an adviser brief about an individual’s longevity risk or industry papers regarding risk exposure inherent in defined benefit pension plans or payout annuity blocks. This article will seek a balanced discussion about longevity risk – why it is of curious interest to US life insurers but not necessarily a priority and what might happen that could change that perspective. We then present an attractive option for managing longevity risk, the longevity swap, and provide real world scenarios illustrating how a longevity swap can help a firm manage their bottom line more effectively.
- Matthew Daitch
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