Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Life and Longevity Markets Association launches four longevity indices


The Life & Longevity Markets Association (LLMA), an industry group who have been working to make longevity a tradeable risk, have announced today the launch of its own four longevity indices. The LLMA Longevity Indices can be used as a reference for the transfer of longevity risk from those seeking to hedge to investors and other counterparties such as re/insurers and banks.

The LLMA have been working towards helping to facilitate the trading of longevity risk, with efforts to standardise swap contract documentation and development of these indices. Almost a year ago the LLMA took over ownership of the JP Morgan LifeMetrics index, which gave them a toolkit for measuring and managing longevity and mortality risk enabling risks to be aggregated and measured in a standardised format. Now, with the release of their own set of indices, which may build on the work of LifeMetrics, they hope that the availability of a robust and accepted benchmark will help to further the growth of the longevity risk transfer market.

The four longevity Indices launched today by the LLMA, cover England and Wales, Germany, the Netherlands and the USA; and can be accessed on the LLMA website here. The Indices will be launched on the Bloomberg platform later this year which should help to promote them and make them easy for market participants to access.

The LLMA is made up of some of the largest participants in the longevity risk transfer market, meaning that the indices launched today will have a certain level of acceptance from the off, something that other indices have struggled with in the past.

Daniel Ryan, Chairman of the LLMA Index Committee (and Head of Research & Development at Swiss Re) commented; “This is a major milestone in the LLMA’s work to support the development of a traded market in longevity and mortality-related risk. Global longevity exposures are measured in trillions of dollars, far in excess of the capacity that exists amongst insurers and reinsurers to provide longevity protection to counterparties such as pension plans. Developing an avenue through which investors can take exposure to longevity will offer additional capacity to the industry.”

“The LLMA’s members have been working for some years now to construct capital market instruments to package longevity risk into tradable portions and to provide a benchmark. This collaborative industry initiative addresses a fundamental need – that of providing trading for the transfer of insurance risk – which is now supported by the LLMA Longevity Index.”

Another set of longevity indices was launched last week, as Deutsche Börse and the longevity analytics arm of Hymans Robertson, Club Vita, announced the launch on Friday of the Xpect – Club Vita Indices. Both of these new indices promise to help make it easier, and more transparent, for carriers of longevity risk to transfer them to other parties and it’s expected that they will help to increase the volume of longevity risk transfer and longevity swaps over the next year. They will also help to broaden the scope of the longevity risk transfer market, which has been very focused on the UK and certain European countries to date.

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