Published : 14/12/2020
Longevity risk, due to its non-diversifiable nature, poses a real concern and not the least for various actors ranging from simple individuals to corporates, insurance companies and pension funds or even governments.
For a long time, various reinsurance solutions made it possible to deal with such a risk to the point where the pooling of risks and the lack of real capacity turned all eyes towards the financial markets and the concept of securitization.
The idea behind this presentation is therefore, after explaining in more detail what has just been mentioned, to explore this concept of transforming insurance risks into financial instruments and more particularly the cases of longevity bonds and swaps which turn out to be the two solutions that have been the most undertaken.
First of all in terms of pricing, the longevity market being fundamentally incomplete given the absence of standardized instruments making it possible to duplicate longevity, various techniques are therefore possible and the choice ended up on the Wang Transform.
Finally, once these products valued, an analysis and comparison of the impact of these hedging instruments on the regulatory capital imposed by the Solvency II regulation will close this topic.