Читать книгу Risk Management and Financial Institutions - Hull John C. - Страница 35

Longevity risk is the risk that advances in medical sciences and lifestyle changes will lead to people living longer. Increases in longevity adversely affect the profitability of most types of annuity contracts (because the annuity has to be paid for longer), but increases the profitability of most life insurance contracts (because the final payout is either delayed or, in the case of term insurance, less likely to happen). Life expectancy has been steadily increasing in most parts of the world. Average life expectancy of a child born in the United States in 2009 is estimated to be about 20 years higher than for a child born in 1929. Life expectancy varies from country to country.

Mortality risk is the risk that wars, epidemics such as AIDS, or pandemics such as Spanish flu will lead to people living not as long as expected. This adversely affects the payouts on most types of life insurance contracts (because the insured amount has to be paid earlier than expected), but should increase the profitability of annuity contracts (because the annuity is not paid out for as long). In calculating the impact of mortality risk, it is important to consider the age groups within the population that are likely to be most affected by a particular event.

To some extent, the longevity and mortality risks in the annuity business of a life insurance company offset those in its regular life insurance contracts. Actuaries must carefully assess the insurance company's net exposure under different scenarios. If the exposure is unacceptable, they may decide to enter into reinsurance contracts for some of the risks. Reinsurance is discussed later in this chapter.

Longevity Derivatives

A longevity derivative provides payoffs that are potentially attractive to insurance companies when they are concerned about their longevity exposure on annuity contracts and to pension funds. A typical contract is a longevity bond, also known as a survivor bond, which first traded in the late 1990s. A population group is defined and the coupon on the bond at any given time is defined as being proportional to the number of individuals in the population that are still alive.

Who will sell such bonds to insurance companies and pension funds? The answer is some speculators find the bonds attractive because they have very little systematic risk. (See Section 1.3 for a discussion of systematic risk.) The bond payments depend on how long people live and this is largely uncorrelated with returns from the market.