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Informed Intermediation of Longevity Exposures
Author(s) -
Biffis Enrico,
Blake David
Publication year - 2013
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/j.1539-6975.2013.01524.x
Subject(s) - longevity risk , securitization , pension , longevity , intermediation , business , capital market , economics , financial intermediary , actuarial science , financial system , finance , biology , genetics
A BSTRACT We examine pension buyout transactions and longevity risk securitization in a common framework, emphasizing the role played by asymmetries in capital requirements and mortality forecasting technology. The results are used to develop a coherent model of intermediation of longevity exposures, between defined benefit pension plans and capital market investors, through insurers operating in the pension buyout market. We derive several predictions consistent with the recent empirical evidence on pension buyouts and offer insights on the role of buyout firms and regulation in the emerging market for longevity‐linked securities. A multiperiod version of the model is used to explore the effects of longevity risk securitization on the capacity of the pension buyout market.