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Predicting life expectancy accurately is the biggest obstacle to pricing longevity risk.
To date the end-buyers of longevity risk have mainly been insurers and reinsurers.
It is much cheaper to try to break off longevity risk and manage it separately.
Whereas a catastrophe can occur in an instant, longevity risk takes decades to unfold.
Still, because buyers wait longer to get their money, these annuities intensify the problems of liquidity and longevity risk.
"Individuals do not fully understand the longevity risk they face," write authors Benjamin Harris and Katharine G. Abraham.
In Britain alone, the total exposure to longevity risk is estimated by the LLMA to exceed £2 trillion.
What premium other investors will demand for taking on longevity risk is the question that will decide the success of this nascent market.
Longevity risk, the risk that people will live longer than expected, weighs heavily on those who run pension schemes and on insurers that provide annuities.
The economic literature has long speculated about the possibility of "survivor bonds" to hedge this longevity risk by paying off when a generation lives longer than expected.
But progress has been glacial.The birth pangs of another market, in longevity risk, also demonstrate that getting innovations widely adopted is not straightforward.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com