Why Hedge Longevity Risk?
Insurers, reinsurers, and pension funds are exposed to increases in general-population longevity. As policyholders live longer than expected, longevity-linked liabilities increase, causing financial losses and straining balance sheets. This risk can lead to significant capital charges, such as those under Solvency 2, or unwanted financial volatility – making longevity risk a good candidate for hedging.
Longevity Risk Hedges:
Longitude deploys a variety of longevity risk hedging structures capable of unlocking a more profitable and sustainable business model for (re)insurers and pensions funds:
- Return-on-Capital: Longevity hedges are designed to provide capital relief at an attractive cost of capital by using optimized structures that access a competitive hedging market.
- Return-on-Risk: By hedging risk more efficiently than it was assumed, (re)insurers can reduce risk concentrations, while retaining high-value segments of longevity risk.
- Nature of Risk: Longevity hedges remove a “trend risk” risk which is un-diversifiable and therefore can’t be reduced through diversification (writing more business).
Longitude’s Hedging Services:
We provide a complete range of longevity analytics and transaction services which enable our client’s to:
- Implement strategies for longevity risk transfer, and pension de-risking
- Analyze their longevity risk and capital using stochastic modeling tools
- Access the longevity risk market, including capital markets investors
Our structuring, placement and other transaction advisory services, include:
- Market testing and analysis to base decision making on actionable intelligence
- Executing longevity risk and other hedging transactions in competitive auctions
- Providing post-execution transaction maintenance and valuations