Blake, David and Boardman, Tom and Cairns, Andrew (2010): Sharing longevity risk: Why governments should issue longevity bonds.
Download (339kB) | Preview
Government-issued longevity bonds would allow longevity risk to be shared efficiently and fairly between generations. In exchange for paying a longevity risk premium, the current generation of retirees can look to future generations to hedge their aggregate longevity risk. There are also wider social benefits. Longevity bonds will lead to a more secure pension savings market - both defined contribution and defined benefit - together with a more efficient annuity market resulting in less means-tested benefits and a higher tax take. The emerging capital market in longevity-linked instruments can get help to kick start market participation through the establishment of reliable longevity indices and key price points on the longevity risk term structure and can build on this term structure with liquid longevity derivatives.
|Item Type:||MPRA Paper|
|Original Title:||Sharing longevity risk: Why governments should issue longevity bonds|
|Keywords:||Longevity Risk; Longevity Bonds; Public Policy; Political Economy|
|Subjects:||A - General Economics and Teaching > A2 - Economic Education and Teaching of Economics > A20 - General
G - Financial Economics > G2 - Financial Institutions and Services > G23 - Non-bank Financial Institutions ; Financial Instruments ; Institutional Investors
G - Financial Economics > G2 - Financial Institutions and Services > G24 - Investment Banking ; Venture Capital ; Brokerage ; Ratings and Ratings Agencies
H - Public Economics > H6 - National Budget, Deficit, and Debt > H63 - Debt ; Debt Management ; Sovereign Debt
J - Labor and Demographic Economics > J1 - Demographic Economics > J11 - Demographic Trends, Macroeconomic Effects, and Forecasts
H - Public Economics > H1 - Structure and Scope of Government > H11 - Structure, Scope, and Performance of Government
G - Financial Economics > G2 - Financial Institutions and Services > G22 - Insurance ; Insurance Companies ; Actuarial Studies
G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation
J - Labor and Demographic Economics > J1 - Demographic Economics > J18 - Public Policy
|Depositing User:||David Blake|
|Date Deposited:||07. Nov 2011 18:08|
|Last Modified:||26. May 2015 13:36|
Antolin, Pablo, and Hans Blommestein (2007), Governments and the Market for Longevity-Indexed Bonds, OECD Working Papers on Insurance and Private Pensions, No. 4, OECD Publishing, Paris.
Blake, David, and William Burrows (2001), “Survivor Bonds: Helping to Hedge Mortality Risk”, Journal of Risk and Insurance, 68: 339-348.
Blake, David, Andrew J.G. Cairns and Kevin Dowd (2006), “Living with Mortality: Longevity Bonds and other Mortality-Linked Securities”, British Actuarial Journal, 12: 153-228.
Blake, David, Andrew Cairns and Kevin Dowd (2008), “Longevity Risk and the Grim Reaper’s Toxic Tail: The Survivor Fan Charts”, Insurance: Mathematics & Economics, 42: 1062-66.
Cairns, Andrew, David Blake and Kevin Dowd (2006), “A Two-Factor Model for Stochastic Mortality with Parameter Uncertainty: Theory and Calibration”, Journal of Risk and Insurance, 73: 687-718.
Chief Risk Officer Forum (2008), “Market Value of Liabilities for Insurance Firms: Implementing Elements for Solvency II”, July.
Dowd, Kevin (2003), “Survivor Bonds: A Comment on Blake and Burrows”, Journal of Risk and Insurance, 70: 339-348.
Dowd, Kevin, David Blake, Andrew G.J Cairns and Paul Dawson (2006), “Survivor Swaps”, Journal of Risk and Insurance, 73: 1-17.
International Monetary Fund (2006), The Limits of Market-based Risk Transfer and Implications for Managing Systemic Risks, Washington DC.
OECD (2008) Pension Markets in Focus, Issue 5, December, Paris.
Office for National Statistics (2010) Pension Trends: Chapter 14 – Pensions and the National Accounts, Newport.
Pension Commission (2005) A New Pension Settlement for the Twenty-First Century, HMSO: Norwich.
Pension Protection Fund and the Pensions Regulator (2006), The Purple Book: DB Pensions Universe Risk Profile 2006, Croydon and Brighton.
Pension Protection Fund and the Pensions Regulator (2008), The Purple Book: DB Pensions Universe Risk Profile 2008, Croydon and Brighton.
Richards, Stephen J., J. G. Kirkby, and Ian. D. Currie (2006), “The Importance of Year of Birth in Two-Dimensional Mortality Data”, British Actuarial Journal, 12: 5–38.
Willetts, Richard C. (2004), “The Cohort Effect: Insights and Explanations”, British Actuarial Journal, 10: 833–77.
World Economic Forum (2009) Financing Demographic Shifts Project, June, Geneva.