Transcript Financial and Monetary Economics

Longevity 5:
Fifth International Longevity Risk and Capital Market
Solutions Conference
(www.longevity-risk.org)
Professor David Blake
Director
Pensions Institute
Cass Business School
[email protected]
September 2009
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Previous conferences

Longevity 1:
 Cass

Business School, London 2005
Longevity 2:
 Chicago

Longevity 3:
 Taipei

2006
2007
Longevity 4:
 Amsterdam
2008
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26 Core global risks, but longevity
risk not included!
Source: World Economic Forum Global Risks 2008
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Longevity risk is a real, underestimated
and slow-burning risk
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Cost of longevity risk


Global pension liabilities = $23trn
Roger Lowenstein* in While America Aged
(2008) discusses “how pension debts ruined
General Motors, stopped the New York
subways, bankrupted San Diego, and loom
as the next financial crisis”
* Author of When Genius Failed
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Dealing with longevity risk


Longevity risk needs to be quantified and
managed
Tools are now being developed to do both:
 In
insurance and reinsurance companies
 In the capital markets


Academics are also interested in analyzing
longevity risk and capital market solutions
But growth has been slowed by the Credit
Crunch and the political dimension has been
missing
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Six longevity swaps in 2008-09
Date
Hedger
Type
Size
(£m)
Term
(yrs)
Format
Intermediary
Jan 2008
Lucida
Ins
N/A
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Index-based hedge;
exposure placed with
capital market investors
JPMorgan
July 2008
Canada
Life
Ins
500
40
Exposure placed with
capital market investors
JPMorgan
Feb 2009
Abbey Life
Ins
1500
Runoff
Reinsurance contract
Deutsche
Bank
Mar 2009
Aviva
Ins
475
10
Exposure placed with
capital market investors &
Partner RE
RBS
June 2009
Babcock
PF
500-750
50
Reinsurance contract with
Pac Life Re
Credit Suisse
July 2009
RSA
Ins
1900
Runoff
Reinsurance contract with
Rothesay Life; combined
with inflation & interest
rate swaps
Goldman
Sachs
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What needs to happen




Continuing with our strategy of bringing together
practitioners and academics from a variety of
relevant disciplines
Extending our community to include
policymakers and their advisers from key
countries with extensive longevity risk exposure
in both the public and private sectors
These are the aims of Longevity 5
Longevity 6 will be at UNSW in September 2010
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