UK/US - JPMorgan has created an international index designed to benchmark and trade longevity risk.
The investment bank said the LifeMetrics Index would enable pension plans to calibrate and hedge the risk associated with the longevity of their beneficiaries.
“The index incorporates historical and current statistics on mortality rates and life expectancy across genders, ages and nationalities,” it added.
The LifeMetrics index is only available in the US, England and Wales at present, but plans are underway to launch in other countries “over the coming months”, the bank said.
The index is calculated by an independent calculation agent and will be governed by an international advisory committee, including experts from different organisations.
The potential for the development of a traded market rests on the standardisation of the measurement of longevity risk associated with pension funds and the mortality risk facing life insurers, added JPMorgan global head of rates, securitised products, proprietary positioning and principal investment businesses, Patrik Edsparr.
“We believe this index will facilitate the development of a market in tradable longevity risk,” he said. “JPMorgan is committed to leading the development of this market.”
The index forms one part of its overall LifeMetrics platform, which was designed to provide clients with a comprehensive framework to manage longevity risk that included analytics and software to model current exposure and forecast future exposure.
The platform is transparent with methodology, algorithms and calculations fully documented and freely available, JPMorgan said.
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