Summary
Most of the western world has seen a steady increase in the average lifetime of its inhabitants over the past century. Although the past trends suggest that further changes in mortality rates are to be expected, considerable uncertainty exists regarding the future development of mortality. This type of uncertainty is referred to as longevity risk. This paper reviews the current state of the literature concerning longevity risk. First, we discuss the modeling of future mortality, including the Lee and Carter (J Am Stat Assoc 87:659–671, 1992)-approach, as well as other approaches. Second we discuss the importance of longevity risk for the solvency of portfolios of pension and life insurance products. Finally, we investigate possibilities for longevity risk management. In particular, we consider longevity risk management through securitization and/or pension and insurance (re)design.
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We would like to thank the discussants Jaap Bos, Cees Dert, Niels Kortleve, and Hens Steehouwer and the participants of the Netspar Panel meeting, April 14, 2009, for their helpful comments. The paper also benefited substantially from the comments of an anonymous referee.
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Open Access This is an open access article distributed under the terms of the Creative Commons Attribution Noncommercial License (https://creativecommons.org/licenses/by-nc/2.0), which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.
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De Waegenaere, A., Melenberg, B. & Stevens, R. Longevity Risk. De Economist 158, 151–192 (2010). https://doi.org/10.1007/s10645-010-9143-4
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DOI: https://doi.org/10.1007/s10645-010-9143-4