Longevity Risk Management
LifeMetrics - Longevity Risk Assessment
LifeMetrics is a toolkit for measuring and managing longevity and mortality risk, designed by J.P. Morgan for pension plans, sponsors, insurers, reinsurers and investors. LifeMetrics enables these risks to be measured in a standardized manner, aggregated across different risk sources and transferred to other parties. It also provides a means to evaluate the effectiveness of longevity/mortality hedging strategies and the size of residual risk. LifeMetrics advisors include Towers Watson and the Pensions Institute at Cass Business School.
Latest update:
- New England & Wales Index data (2011)
- New United States Index data (2008)
- J.P. Morgan transfers intellectual property to the LLMA to further longevity market development
- New Germany Index data (2009)
- New research paper on backtesting stochastic mortality models
- New research paper on longevity hedging, basis risk and hedge effectiveness
- New Netherlands Index data (2009)
- England & Wales (2011)
- The Netherlands (2009)
- Germany (2009)
- United States (2008)
Toolkit components
LifeMetrics consists of three complementary components:
- Index: Data for evaluating current and historical levels of mortality and longevity. The LifeMetrics Index can also serve as the reference for mortality and longevity transactions
- Framework: A set of tools, methods and algorithms for measuring and managing longevity and mortality risk. These are fully documented in the LifeMetrics Technical Document
- Software: Software for developing mortality projections
Differentiating features
- International indices: LifeMetrics Indices are published for a number of different countries, and we will continue to add more countries in the future
- Transparency: All methodology, algorithms and calculations are fully disclosed and open
- Standardization: LifeMetrics is explicitly designed to facilitate the structuring of longevity securities and derivatives. J.P. Morgan is developing flexible, standardized longevity hedging instruments based on this index
- Risk Management: Tools to assist in developing forecasts of future longevity, analyze the impact on portfolios and design risk management solutions. LifeMetrics addresses the basis risk between actual populations and the national population
Innovation
LifeMetrics is intended to raise the profile of longevity/mortality risk management, increase the transparency surrounding this risk and provide practical tools and methods to measure and manage it. In particular, our goals in launching LifeMetrics are to:
- Assist pension funds and their sponsors in implementing more effective management of longevity risk
- Educate investors to promote the development of a liquid market for longevity-linked assets
- Provide alternative risk transfer solutions for insurers and reinsurers to complement their existing toolkits for both managing and sourcing longevity and mortality risk
- Build a liquid market for longevity derivatives