A survey of UK-based pension plan sponsors indicates that 40 percent expect longevity derivatives--such as longevity swaps--to play a strong role in mitigating longevity risk.
UK defined benefit pension plan sponsors are seeking solutions that will allow them to off-load the risk that their pension plan participants live longer than expected.
Use of derivatives to address longevity risk and other pension funding related issues serves as an alternative to other solutions such as a full pension buy-out where an insurance company or reinsurance company assumes all the assets and liabilities of a pension plan.
Source: Financial Times
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