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Survivor Bonds: A Comment on Blake and Burrows
Author(s) -
Dowd Kevin
Publication year - 2003
Publication title -
journal of risk and insurance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.055
H-Index - 63
eISSN - 1539-6975
pISSN - 0022-4367
DOI - 10.1111/1539-6975.00063
Subject(s) - reinsurance , bond , argument (complex analysis) , coupon , payment , actuarial science , derivative (finance) , state (computer science) , economics , law and economics , government (linguistics) , business , financial economics , finance , philosophy , computer science , linguistics , algorithm , biochemistry , chemistry
This article offers a critical assessment of the “survivor bonds” (SBs) proposal recently put forward by Blake and Burrows, which calls for the government to issue bonds whose coupon payments are contingent on the proportions of retirees surviving to particular ages. It suggests that the proposal has considerable merit and discusses the circumstances in which SBs would be useful risk management tools for insurance companies. It also discusses alternatives such as reinsurance, hedging with life contracts, dynamic hedging, and other forms of survivor derivative. Finally, it evaluates and rejects the argument that SBs should be issued by the state.