This paper assesses the impact of longevity risk management on insurer shareholder value and solvency for an annual portfolio. The analysis uses a multi-period stochastic mortality model with both systematic and idiosyncratic longevity risk. We consider both survivor, or longevity, swaps that...

Pricing and risk management for longevity risk has increasingly become a major challenge for life insurers and pension funds around the world. Risk transfer to financial markets, with their major capacity for efficient risk pooling, is an area of significant development for a successful...

The recent international credit crisis has highlighted the significant exposure that banks and insurers, especially mono-line credit insurers, have to residential house price risk. This paper provides an assessment of risk models for residential property for applications in banking and insurance...

For many years the longevity risk of individuals has been underestimated as survival probabilities improved across the developed world. The uncertainty and volatility of future longevity has posed significant risk issues for both individuals and product providers of annuities and pensions. This...

Mortality models used to assess longevity risk and retirement funding have been extended to stochastic models with trends and systematic risk. Systematic risk cannot be readily diversified in an insurance pool or pension fund. It is an important factor in assessing solvency and highlighting the...

Changing demographics creates the potential for the expansion of existing and new products to manage longevity risk. Life annuities address this risk, yet these annuity product markets are thin. Insurers are concerned about the long term risks associated with these longevity products and capital...

There is a significant potential demand in many countries around the world for a flexible product to manage individual longevity risk arising from the prevalence of defined contribution pensions, uncertainty in improvements in life expectancy, potential reductions in public pensions and a lack...

Pension funds and life insurers offering annuities hold long term liabilities linked to longevity. Risk management of life annuity portfolios aims to immunize or hedge both interest rate and mortality risks. Standard fixed interest duration-convexity hedging must be adapted to allow for both...

Developing a liquid longevity market requires reliable and well-designed financial instruments. An index-based longevity swap and a cap are analyzed in this paper under a tractable stochastic mortality model. The model is calibrated using Australian mortality data and analytical formulas for...

Existing longevity indices commonly use age-based mortality rates or period life expectancy. We propose an alternative cohort-based value index for insurers and pension funds to manage longevity risk. This index is an expected present value of a longevity linked cash flow valued using a...