Definition of longevity bond

Life expectancy has steadily increased since the 1960s and is now among the key risks for pension funds, insurers and other companies that have under-estimated longevity risks - the risk that people will live longer than expected - and are seeking ways to meet their growing obligations.

Banks and other market participants have devised variations of “mortality bonds”, whose value fall if deaths occur earlier than expected, and “longevity bonds” which move the opposite way. [1]

Longevity bonds help pension schemes cope with increased life expectancy [2]

These bonds are financial instruments that absorb the costs of providing pensions of people living to be very old and are often used by pension funds and annuity providers. [3]

Everyone wins if UK issues longevity bond

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