Association launched to promote trading of longevity risk

Association launched to promote trading of longevity risk

The Life and Longevity Markets Association has been formed to promote the development of a liquid traded market in longevity and mortality-related risk, of the type that exists for insurance linked securities and other large trend risks. 

The association will support the development of consistent standards, methodologies and benchmarks to help build a liquid trading market, necessary to support the future demand for longevity protection sought by insurers and pension funds.
 
The LLMA has been established by Axa, Deutsche Bank, J.P. Morgan, Legal & General, Pension Corporation, Prudential, RBS and Swiss Re.
 
John Fitzpatrick, a director of the LLMA, says: “The launch of the LLMA brings together a number of parties to create marketwide standards suitable to promote a liquid traded market. Longevity risk is starting to move to pension insurers and reinsurers in significant volumes but much more is likely in the future from pension funds anxious to control their future liabilities. The LLMA’s work will bring benefits to capital markets investors enabling their investment and trading through the growth of a new and uncorrelated asset class.”
 
As the baby boomers retire and longevity expectations continue to increase across the developed world at historically high rates against largely fixed retirement/entitlement dates demand will rise for ways to protect against this growing financial risk.

The development of longevity trading will help to address the future expected demand in the market and allow more and more pension funds to secure their members’ benefits for the future.

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