OECD backs longevity index to help manage risk of living longer
[LONDON] The Organisation of Economic Cooperation and Development said on Monday it wanted to see stronger rules around the management of the risk of people living longer, and backed the creation of an index to better price it.
In its OECD Pensions Outlook 2014, the Paris-based group said issuing longevity bonds and publishing an index to serve as the benchmark for the pricing and risk assessment of hedges would support the development of longevity instruments.
"Capital markets could offer additional capacity for mitigating longevity risk, but the transparency, standardization and liquidity of instruments to hedge this risk need to be facilitated," the OECD said in a statement.
"The regulatory framework will also need to reflect the reduction of risk exposure these instruments offer by ensuring they are appropriately valued by accounting standards and lowering the level of required capital for entities hedging their longevity risk."
Regulators needed to ensure providers used regularly updated mortality tables, to reflect improvements in life expectancy, as failure to do so could result in a provision shortfall of well over 10 per cent of the pension and annuity liabilities, it said.
REUTERS
KEYWORDS IN THIS ARTICLE
BT is now on Telegram!
For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes
International
Beijing city to subsidise domestic AI chips, targets self-reliance by 2027
China passes tariff law as tensions with trading partners simmer
Blinken meets Chinese counterpart Wang Yi in Beijing
South Korea’s public finances no longer a credit rating ‘strength’: Fitch
UK consumer confidence improves as inflation and taxes fall
Inflation in Japan’s capital falls below BOJ target, slows for second month