Promoting a liquid longevity risk market
Pension costs for governments and employers in major economies are likely to grow significantly in coming years as the population lives longer. In order to deal with this risk, there needs to be a liquid market in place to trade risks relating to longevity and mortality. The Life and Longevity Markets Association (LLMA), based in London, has been created to promote the trading of longevity risk as an asset class. Swiss Re is a founding member.
Governments and corporations have significant longevity exposures which they will increasingly look to manage. Creating a liquid market for trading longevity risk is a key step towards growing market capacity for such risk transfers.
“There already exists longevity capacity within insurance markets but this isn't sufficient to meet the long term future needs of all potential cedents. The long term development of a longevity investor base and longevity trading instruments will help insurers to continue to meet the growing demands of cedents such as pension funds” says Christian Mumenthaler, Head of Life & Health.
Jonathan Graham, Global Head of Pricing at Swiss Re's Asset Management Unit, comments: “We are pleased to have been involved in the foundation of the LLMA. We believe the LLMA brings together the right blend of constituents to start developing the framework needed to support growth of a longevity investor base.”
The LLMA is a non-profit organisation founded and funded by current members. The members are AXA, Deutsche Bank, JP Morgan, Legal & General, Pension Corporation, Prudential, RBS and Swiss Re. The short-term focus will be on the UK market for longevity and mortality.
The aim of the association is to support the development of consistent standards, methodologies and benchmarks to help build a liquid trading market, necessary to support the future demand for longevity protection sought by insurers and pension funds.
