RT Journal Article
SR Electronic
T1 Mortality Plateaus and the Pricing of Longevity Insurance
JF The Journal of Retirement
FD Institutional Investor Journals
SP 99
OP 107
DO 10.3905/jor.2014.2.2.099
VO 2
IS 2
A1 Moshe A. Milevsky
YR 2014
UL https://pm-research.com/content/2/2/99.abstract
AB The article examines the implications for the pricing of longevity insurance and life annuities of a plateauing in the instantaneous force of mortality (IFM) at advanced ages. Given the increasing popularity of advanced life delayed annuities (ALDAs, or deferred-income annuities) and the current low-interest-rate environment, the present-value cost of misestimating the dynamics of late-life mortality can be substantial. The article also offers some comments about the possibility of using ALDA prices to imply market expectations of mortality dynamics and plateaus in a manner similar to implied volatility in the options market. All this has obvious implications for annuity buyouts, buy-ins, and other forms of longevity risk transfer as well the most pressing retirement problem for individuals—how to make their money last for the remainder of their lives.TOPICS: Retirement, fixed income and structured finance, wealth management