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Aging populations and longevity risk transfer through securitization topical in China


Proponents of longevity risk transfer through instruments such as securitization via a catastrophe bond type structure (in a similar manner to Swiss Re’s Kortis Capital deal), or swaps, derivatives and hedging mechanisms, will be pleased to learn that this has now become a topic of discussion in China.

Usually thought to be constrained to the most developed of nations, awareness of longevity risk is now becoming more widespread. This translated article (translated through Google), originally published in the People’s Daily, refers to a statistical bulletin which showed that the number of people in China above 60 has increased significantly over the last ten years. This has started a discussion about longevity and the impact of the growing risk.

At the moment, we tend to think of longevity risk as a solely western, fully developed nation problem, but actually it is gradually becoming an issue across the globe and any nation with life insurance and pension schemes will face rapidly growing longevity risks in the future. Countries like China could face such significant longevity risks that their only options to combat them may be to transfer those risks to the capital markets, the only source of capital large enough to cover them.

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