Sharing longevity risk: Why governments should issue longevity bonds
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.
|Date of creation:||Mar 2010|
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- 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.
- Nicolas R. Blancher & FranÃ§ois Haas & John Kiff & Oksana Khadarina & Paul S. Mills & Parmeshwar Ramlogan & William Lee & Yoon Sook Kim & Todd Groome & Shinobu Nakagawa, 2006. "The Limits of Market-Based Risk Transfer and Implications for Managing Systemic Risks," IMF Working Papers 06/217, International Monetary Fund.
- Pablo Antolin & Hans J. Blommestein, 2007.
"Governments and the Market for Longevity-indexed Bonds,"
Financial Market Trends,
OECD Publishing, vol. 2007(1), pages 153-175.
- Pablo Antolín & Hans J. Blommestein, 2007. "Governments and the Market for Longevity-Indexed Bonds," OECD Working Papers on Insurance and Private Pensions 4, OECD Publishing.
- Andrew J. G. Cairns & David Blake & Kevin Dowd, 2006. "A Two-Factor Model for Stochastic Mortality with Parameter Uncertainty: Theory and Calibration," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 73(4), pages 687-718.
- Kevin Dowd, 2003. "Survivor Bonds: A Comment on Blake and Burrows," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 70(2), pages 339-348.
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