The Case For Longevity Bonds

IB#10-10

The brief’s key findings are:

  • “Longevity bonds” would allow insurers and pension plans to hedge aggregate longevity risk.
  • The bonds’ coupon would rise if a cohort lived longer than expected, offsetting higher annuity costs.
  • Longevity bonds would lower capital requirements for insurers and reduce risk for pension plan sponsors.
  • Governments could take the lead in issuing such bonds and gradually shift most of the responsibility to the capital markets.