Deutsche Bank aims to boost longevity liquidity with index launch
Deutsche Bank has launched a longevity risk index in the hope that it will increase liquidity within the market.
The company said the Longevity Experience Options (LEO) was meant to provide a standardised approach, allowing pension funds to further hedge longevity risk.
Paul Puleo, head of pensions and insurance risk markets, noted that many of the current approaches to hedging longevity risk were “costly and time-consuming”.
“While we expect the bespoke market will continue to grow, the next step in development of this market is to make longevity risk management available to a broader range of market participants,” he said.
He added that the LEO would supplement existing approaches to risk management and help create greater liquidity in the market, lowering prices for participants.
The OECD has repeatedly called for governments to help “kick-start” functional longevity risk markets by issuing bonds linked to individual population’s liquidity.
Deutsche Börse had similarly predicted that ETFs could be used to trade longevity, and the UK’s Life & Longevity Markets Association has long pushed for a more liquid market, proposing a framework to set standards for indices.
Deutsche said the LEO incorporated survival rates based on publicly available population data from national statistics bodies, referencing five year groups based on gender.
The bank said its product would at first target UK and Dutch investors, with products based around the population of the Netherlands and people in England and Wales – the latter based on data provided by the UK’s Office of National Statistics.