Creative thinking around longevity risk

(Jul 6, 2014)

The U.K. has been a hotbed of innovation when dealing with the longevity risk found in pension schemes.  Historically, schemes had the option of a traditional buy-out or buy-in policy with an insurance company (a route which may be cheaper than some people realise).  Then we saw the advent of index-based hedging, although this option has its challenges and is more of a niche market at the time of writing.  However, other innovations have shown vigorous growth, such as the market for longevity swaps.  Now the BT pension scheme (BTPS) has shown a new level of creative thinking for pension schemes: setting up your own wholly-owned insurance company so you can tap the global reinsurance market.

BTPS's move brought…

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Tags: longevity risk, regulation, longevity swaps

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