Lessons from the World of Micro Longevity

Abstract

The pension risk transfer market has a bottleneck in its inability to attract sufficient institutional investor interest as longevity risk takers. Having spent many years at a large institution as part of a team investing directly in longevity risk via the life settlements market, the author encountered many of the challenges of managing this nascent risk type. The pension risk transfer market often seems at pains to distance itself from its life settlements cousin; however, in many ways “longevity is longevity” and the experience of dealing with the challenges in life settlements can offer valuable insights to investors across the full spectrum of the risk class. The article is aimed at capital markets investors considering longevity as an investable asset. It offers a discussion of the current perception of longevity risk, as well as a list of hints and warnings derived from direct market experience.