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Financial Innovation and the Hedging of Longevity Risk


  • Sherris Michael

    (University of New South Wales, Australia)

  • Wills Samuel

    (University of New South Wales, Australia)


Longevity risk is one of the remaining frontiers challenging modern financial markets and financial engineering. Financial innovation has yet to successfully master this very significant risk facing many countries internationally. For well over a hundred years this risk has been the domain of life insurance companies, reinsurance companies and actuaries. The aging population around the world drives the need for new products for managing longevity risk and new markets for hedging this risk. We consider how financial markets and financial product innovations can ideally be used to hedge longevity risk and also consider lessons from the insurance linked securities market that could be used to successfully fund this risk in financial markets.

Suggested Citation

  • Sherris Michael & Wills Samuel, 2008. "Financial Innovation and the Hedging of Longevity Risk," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 3(1), pages 1-14, September.
  • Handle: RePEc:bpj:apjrin:v:3:y:2008:i:1:n:4

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    References listed on IDEAS

    1. Alex Cowley & J. David Cummins, 2005. "Securitization of Life Insurance Assets and Liabilities," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 72(2), pages 193-226.
    2. Willets, R. C., 2004. "The Cohort Effect: Insights and Explanations," British Actuarial Journal, Cambridge University Press, vol. 10(04), pages 833-877, October.
    3. Blake, David & Dowd, Kevin & Cairns, Andrew J.G., 2008. "Longevity risk and the Grim Reaper's toxic tail: The survivor fan charts," Insurance: Mathematics and Economics, Elsevier, vol. 42(3), pages 1062-1066, June.
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    Cited by:

    1. repec:gam:jrisks:v:6:y:2018:i:1:p:10-:d:131400 is not listed on IDEAS
    2. Samuel H. Cox & Yijia Lin & Ruilin Tian & Jifeng Yu, 2013. "Managing Capital Market and Longevity Risks in a Defined Benefit Pension Plan," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 80(3), pages 585-620, September.

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