MANAGING LONGEVITY RISK

Longevity risk is a primary insurance risk within an annuity business. Until recently there has been a very limited secondary market for hedging this risk and we have therefore retained and managed longevity risk in-house.

The Annuity business has built up a considerable amount of expertise in analysing current mortality trends using our large database of past experience. Future longevity trends will be impacted by a range of inter-connected factors, including developments in medical science, lifestyle trends, economic and government policies. It is impossible to predict the ultimate outcome, but insight can be gained to the range of possible outcomes, their likelihood and impact. We employ a variety of actuaries, statisticians, demographers and epidemiologists, and have strong links with the medical profession and relevant organisations through our links with UCL and the Longevity Science Advisory panel.

We are closely involved in the growing secondary market for reinsuring longevity which gives the opportunity to selectively manage longevity exposure, giving us the ability to reinsure risks where pricing looks attractive.

The Annuity business is also taking a leading role in the Life & Longevity Markets Association (LLMA), which aims to develop wider capital markets participation in longevity risk.