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Longevity Basis Risk

A research project jointly commissioned by the IFoA and Life and Longevity Markets Association (LLMA) has developed a readily-applicable methodology for quantifying the basis risk arising from the use of population-based mortality indices for managing longevity risk.

Longevity basis risk arises because different populations, or subpopulations, will inevitably experience different longevity outcomes. This is a significant issue for those wishing to hedge longevity risk using a published mortality index – whether they be pension schemes, insurers, reinsurers, or banks.

This work will be beneficial to a wide variety of organisations and individuals, including pension schemes and their members as well as insurance companies, which write annuity business. These and other institutions which are exposed to, or would like to invest in, longevity risk will gain from a new methodology for quantifying risk related to longevity.

Phase 2: 2016/2017

The purpose of Phase 2 has been to:

  • determine the most relevant metrics for measuring longevity basis risk and hedge effectiveness;
  • apply the approach in Phase 1 to realistic worked examples based on appropriate data;
  • present a robust quantification of basis risk to third parties such as regulators; and
  • investigate the potential limitations of the time series processes.

Outputs:

Research commissioned by: The IFoA and the LLMA
Project conducted by:

Macquarie University, University of Waterloo, Australian National University and Mercer Australia

Commenced: 2016
Status: Completed in 2017

    Phase 1: 2013/2014

    Phase 1 of this research focused on producing a methodology that could be used to quantify longevity basis risk and assess the level of risk reduction that might be brought about through the use of an index-based longevity hedge. It resulted in a framework that recognised the fact that different practitioners will have different portfolios, different volumes and histories of experience data, and different constraints of the models that they can use in practice.

    Outputs:

    Research commissioned by: The IFoA and the LLMA
    Project conducted by:

    The Cass Business School, City University, and Hymans Robertson LLP

    Commenced: 2013
    Status: Completed in 2014

    Contact Details

    If you have any questions or wish to discuss any aspect of our awards and Honorary Fellowships, please contact the Public Affairs team on:

    research@actuaries.org.uk

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    • China New Year Member Event and Thank-you Party for Volunteers (Beijing & Shanghai & Shenzhen)

      Beijing Chinese address: 北京瑞吉酒店 记者俱乐部酒吧,朝阳区建国门外大街21号 English address: Press Club Bar, St Regis Hotel Beijing, No. 21 Jianguomenwai Street, Chaoyang District, Beijing Shanghai Chinese address:布朗石西班牙餐厅酒吧(96广场店),东方路796号九六广场1楼130单元 English address: Brownstone Tapas & Lounge (96 Plaza),  96 Plaza, F1, Room 130, No. 796 Dongfang Road Shenzhen Chinese address: 稻亭日本料理(购物公园店), 深圳市民田路购物公园北2楼206号 English address: Daoting Japanese Cuisine (Shopping Park), Room 206, No. 2 North  Building, Shopping Park, Mintian Road, Shenzhen
      22 January 2019 - 25 January 2019

      Spaces available

      The IFoA Beijing Office would like to invite our members in the region to join the New Year Member Event and Thank-you Party for Volunteers, to thank all our members and volunteers, to congratulate all the new qualifiers in the 2018 September exam session, and to celebrate the New Year and the Spring Festival! Food and drinks will be served. The IFoA CEO Mr Derek Cribb will also join the Beijing and Shanghai events.

    • KSS Event: How to be a High-Frequency Trader

      KPMG   Saltire Court 20 Castle Terrace Edinburgh EH1 2EG
      24 January 2019

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      This talk, which is based on interviews with 78 high-frequency traders (and other relevant people, such as those who supply them with information links), will ‘open the black box’ of HFT. The speaker will examine the main internal divide within HFT: between algorithms, trading groups and firms that specialise in ‘making’ (adding bids or offers to order books that cannot be executed immediately) and those that specialise in ‘taking’ (entering orders that can be executed immediately). 

    • Professional Skills Training event - Jointly organised by the IFoA and the Society of Actuaries of Thailand (SOAT)

      Ocean Life Insurance PCL, Meeting room 1, 24th Floor, 170/74-83 Ocean Tower 1 Building, Rachadapisek Road, Klongtoey, Bangkok 10110, Thailand We would like to thank Ocean Life Insurance PLC for sponsoring the venue  
      30 January 2019

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      Jointly organised by the IFoA and SOAT, this session held in Bangkok is suitable for actuaries working in any area (i.e. it is not specifically aimed at Life, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions. 

    • ARC Event on Periodical Payment Orders

      Staple Inn, High Holborn, London WC1V 7QJ
      20 February 2019

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      The IFoA’s Actuarial Research Centre (ARC) is convening a research event on the subject of Periodical Payment Orders (PPOs) in late February 2019.

    • IFRS17 Workshop, 21 February

      Staple Inn Hall, High Holborn, London, WC1V 7QJ
      21 February 2019

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      IFoA Logo for EventsThe Life Board and Life Lifelong Learning Sub-committee are running this half-day workshop on IFRS 17.

      They will provide a detailed understanding of the key concepts of the standard, as well as discuss how implementation will impact people, process and systems.  They will also share views on how the new standard will change the way insurers are viewed in the market, and share perspectives from within and outside of the profession.

       

    • Highlights of the Life Conference 2018 - London

      Ect Venues, 200 Aldersgate, St. Pauls, London EC1A 4HD
      5 March 2019

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      This event will cover the highlights from the Life Conference 2018 held in Liverpool. The Conference Committee are reviewing session feedback and will be putting together a high quality technical programme featuring the best sessions from the Life Conference 2018.  Book now to ensure your place.

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      Staple Inn Hall, High Holborn, London, WC1V 7QJ
      11 March 2019

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    • Sessional Meeting: Investment risk for long term investors - risk measurement approaches

      Staple Inn Hall, High Holborn, London, WC1V 7QJ
      18 March 2019

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      The term ‘investment risk’ is often used loosely, and frequently confused with the notion of short term price volatility, particularly for equity instruments. For the long term investor, however, what is most apposite is the ability to meet future real cash flows as they become due.

    • Highlights of the Life Conference 2018 - Edinburgh

      Apex Grassmarket Hotel, 31-35 Grassmarket, Edinburgh EH1 2HS
      19 March 2019

      Spaces available

      This event will cover the highlights from the Life Conference 2018 held in Liverpool. The Conference Committee are reviewing session feedback and will be putting together a high quality technical programme featuring the best sessions from the Life Conference 2018.  Book now to ensure your place.

    • Professional Skills Training - London (19 March 19)

      Staple Inn Hall, High Holborn London WC1V 7QJ
      19 March 2019

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      Barnett Waddingham 163 West George Street, Glasgow, G2 2JJ
      20 March 2019

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    • Professional Skills Training - Edinburgh (26 March 19)

      IFoA (Edinburgh), Level 2, Exchange Crescent 7 Conference Square Edinburgh EH3 8RA
      26 March 2019

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      A 2 hour CPD event designed to meet the IFoA’s Stage 3 Professional Skills Training under the IFoA’s CPD Scheme 2018/2019.  This session is suitable for actuaries working in any area (i.e. it is not specifically aimed at Pensions, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions.

    • Professional Skills Training - London (16 April 19)

      Staple Inn Hall, High Holborn London WC1V 7QJ
      16 April 2019

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      A 2 hour CPD event designed to meet the IFoA’s Stage 3 Professional Skills Training under the IFoA’s CPD Scheme 2018/2019.  This session is suitable for actuaries working in any area (i.e. it is not specifically aimed at Pensions, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions.

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    • Professional Skills Training - Edinburgh (30 April 19)

      IFoA (Edinburgh), Level 2, Exchange Crescent 7 Conference Square Edinburgh EH3 8RA
      30 April 2019

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      A 2 hour CPD event designed to meet the IFoA’s Stage 3 Professional Skills Training under the IFoA’s CPD Scheme 2018/2019.  This session is suitable for actuaries working in any area (i.e. it is not specifically aimed at Pensions, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions.

    • IFoA Asia Conference 2019, Chengdu

      Crowne Plaza Chengdu Panda Garden, Poly Park 198, No. 1980 ShuLong Avenue,Xindu District, Chengdu 
      9 May 2019 - 10 May 2019

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      SAVE THE DATE

      The annual IFoA Asia conference is scheduled for 09 - 10 May 2019 in Chengdu, China.

    • CILA 2019

      30 Euston Square, London NW1 2FB
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    • Professional Skills Training - London (16 May 19)

      Staple Inn Hall, High Holborn London WC1V 7QJ
      16 May 2019

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    • Sessional Research Event - Saving for Retirement: Rules of Thumb

      Staple Inn Hall, High Holborn London WC1V 7QJ
      20 May 2019

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      How much does the average person need to save over a full working life to provide a decent retirement income? We call this the Lifetime Pension Contribution (LPC) and have attempted to quantify it. Discussing whether we have got it right is a valuable debate, touching on the anticipated level of retirement benefits, the required fund at retirement to achieve those benefits and how our conclusions fit with automatic enrolment. It is also closely related to the PLSA’s development of Retirement Income Targets.

    • Professional Skills Training - London (12 June 19)

      Staple Inn Hall, High Holborn London WC1V 7QJ
      12 June 2019

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      A 2 hour CPD event designed to meet the IFoA’s Stage 3 Professional Skills Training under the IFoA’s CPD Scheme 2018/2019.  This session is suitable for actuaries working in any area (i.e. it is not specifically aimed at Pensions, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions.

    • Current Issues in General Insurance (CIGI) 2019

      Inmarsat, 99 City Road, London, EC1Y 1BJ
      19 June 2019

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    • Professional Skills Training - London (25 June 19)

      Staple Inn Hall, High Holborn London WC1V 7QJ
      25 June 2019

      Spaces available

      A 2 hour CPD event designed to meet the IFoA’s Stage 3 Professional Skills Training under the IFoA’s CPD Scheme 2018/2019. This session is suitable for actuaries working in any area (i.e. it is not specifically aimed at Pensions, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions.