Sharing Longevity Risk: Why Governments Should Issue Longevity Bonds |
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| Authors: | David Blake Tom Boardman Andrew Cairns |
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| Affiliation: | 1. Pensions Institute, Cass Business School , City University London , London , United Kingdom;2. Maxwell Institute for Mathematical Sciences and Department of Actuarial Mathematics and Statistics , Heriot-Watt University , Edinburgh , United Kingdom |
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| 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 systematic longevity risk. Longevity bonds will lead to a more secure pension savings market, together with a more efficient annuity market. By issuing longevity bonds, governments can aid the establishment of reliable longevity indices and key price points on the longevity risk term structure and help the emerging capital market in longevity-linked instruments to build on this term structure with liquid longevity derivatives. |
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