Influencing Financial Innovation: The Management of Systemic Risks and the Role of the Public Sector

Longevity Risk-Sharing Annuities: Partial Indexation in Mortality Experience

“…Regulations may stimulate LRT when this leads to reserve relief for longevity risk sellers similar to the relief provided by more traditional reinsurance arrangements. As with traditional reinsurance, though, relief is only provided if the risk transfer is effective and material basis risk is absent (Groome et al (2011)). For example, UK DB pension plans can get regulatory relief by holding assets with payouts that mirror the behaviour of their liabilities, yet they have to demonstrate the effectiveness of the risk transfer.…”