Longevity Risk and Capital Markets: The 2010–2011 Update

Blake, David; Courbage, Christophe; MacMinn, Richard D.; Sherris, Michael

doi:10.1057/gpp.2011.27

Cited by 8 publications

(5 citation statements)

References 33 publications

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“…However, the insurance/reinsurance industry and capital markets have not provided products of sufficient range and quality suggesting a reluctance to speculate on longevity risk for increased returns (Blake et al . : 489). Given this market failure, the Henry Tax Review of Australia's future tax system recommended that the federal government support the development of these products and their provision through the private sector by issuing long‐dated bonds.…”

Section: Longevity Riskmentioning

confidence: 98%

Risky by Design: The Mandatory Private Pillar ofAustralia's Retirement Income System

Borowski

2013

Soc Policy Adm

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Australia's retirement income system has been touted by some as among the world's best. Its contemporary architecture mirrors the 'ideal' recommended by the World Bank. Yet occupational superannuation, the mandatory private pillar of Australia's retirement income system, is one to which many uncertainties and, hence, risks are attached almost by design. This article explores some of these systemic risks in light of the impact of the global financial crisis (GFC) and its aftermath and considers some of their implications. The range of risks includes inflation risk, malfeasance and incompetence in the management of superannuation funds, exchange rate risk, investment risk, longevity risk and political risk. However, this article focuses on the latter three. While Australia's federal governments have become increasingly conscious of investment risk and longevity risk, greater sensitivity to political risk and its impacts is still needed.

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Section: Longevity Riskmentioning

confidence: 98%

Risky by Design: The Mandatory Private Pillar ofAustralia's Retirement Income System

Borowski

2013

Soc Policy Adm

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“…Developments by several parties (J. P. Morgan, Lifemetrics; Goldman Sachs, QxX.LS; Deutsche Bank, Xpect Age) are now focused on standardizing products so that a fluid market in longevity risk can be created. A more detailed summary of the developments in this respect can be found in Blake et al (2011).…”

Section: Longevity Riskmentioning

confidence: 99%

“…For example, recent deals involving longevity include Rolls Royce, which entered a £3bn longevity swap deal with Deutsche Bank in 2011; British Airways, which entered a £1.3bn deal with Goldman Sachs in 2010 and again in 2011; and Pilkington Glass, which entered a £1bn with Legal and General in 2012. For a review of the development of the international longevity market see Cairns et al (2006a), Barrieu et al (2012) and Blake et al (2011).…”

Section: Introductionmentioning

confidence: 99%

A Dynamic Factor Approach to Mortality Modeling

French

O’Hare

2013

Journal of Forecasting

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Longevity risk has become one of the major risks facing the insurance and pensions markets globally. The trade in longevity risk is underpinned by accurate forecasting of mortality rates. Using techniques from macroeconomic forecasting we propose a dynamic factor model of mortality that fits and forecasts age‐specific mortality rates parsimoniously. We compare the forecasting quality of this model against the Lee–Carter model and its variants. Our results show the dynamic factor model generally provides superior forecasts when applied to international mortality data. We also show that existing multifactorial models have superior fit but their forecasting performance worsens as more factors are added. The dynamic factor approach used here can potentially be further improved upon by applying an appropriate stopping rule for the number of static and dynamic factors. Copyright © 2013 John Wiley & Sons, Ltd.

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“…Pension funds and insurance companies issuing life annuities have been exposed to this systematic risk, and this has the potential to impact solvency, especially in the tail of the distribution of survivors. Although some of this risk has been transferred to reinsurers using reinsurance and longevity swaps, much of this risk is accumulating with insurers, pension funds, and reinsurers, and it has not been diversified into the broader financial markets (Blake et al 2011).…”

Section: Michael Sherris and Qiming Zhoumentioning

confidence: 99%