GLOBAL - A conclusive majority of some of the world's largest pension funds would not accept a standardised measure of longevity, exclusive research by Global Pensions has revealed.
Some 64% of the Global Pensions 100 Panel voted no when asked whether they would be prepared to accept the use of indices constructed around broad population cohorts in the new crop of “mortality derivatives” being developed in the UK.
Mortality derivatives are instruments that would enable pension funds to hedge the longevity risk out of their portfolfio.
BNP Paribas recently announced it had developed a number of indices which it believed could “easily” be used as the standard index for “mortality derivatives”, and Deutsche Bank and JPMorgan Chase in the UK are also developing such products.
Only 36% of the pension funds surveyed by Global Pensions said they would accept a standardised measure of longevity.
Commenting on the results, David Blake, director of the Pensions Institute at Cass Business School said: “I am delighted to hear that 64% of respondents said they wouldn’t be prepared to accept a standardised measure of longevity.
“It is such a diversity of view that will help to create a market in longevity risk transference, with some participants believing that longevity will continue to improve significantly, while others believe the opposite. There would be no market if everyone took the same view.”
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