Sharing longevity risk: Why governments should issue longevity bonds

Blake, David and Boardman, Tom and Cairns, Andrew (2010): Sharing longevity risk: Why governments should issue longevity bonds.

Abstract

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
• Language: English
• 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

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