Theory to practice - Book review: Longevity Risk
The idea of transferring longevity risk from pension schemes and insurers to the capital markets has become a tangible reality with the signing of a number of deals in the last 18 months. Longevity Risk, edited by Emma McWilliam, looks at the practical and theoretical issues related to this new form of financial instrument, writes Aaron Woolner
Actuarial discussions over life expectancy often contain an air of black humour. Heavy mortality (people dying earlier) is good for those managing liabilities, whereas light mortality (a lower-than-expected number meeting their maker) has the opposite effect. The unspoken subtext is what is good for the general public, such as advances in medical science and smoking bans, is bad for the insurers and pensions funds that have to foot the bill for increased life expectancy.
And the bill for this is
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