New Derivative….The Life and Longevity Markets Association

Posted By on February 1, 2010

When in doubt: create another derivative. Insurers now want to be protected against people living longer. According to The Wall Street Journal: “Eight investment banks and insurers have come together to develop an organized market to help them spread the financial risks and costs of an aging society more widely. The Life and Longevity Markets Association, which launches Monday, aims to take instruments known as longevity swaps into the mainstream. Most of these deals have so far been private, over-the-counter transactions between insurers and reinsurers. The initiative, which involves Deutsche Bank AG, J.P. Morgan Chase & Co.’s J.P. Morgan, and Royal Bank of Scotland PLC, as well as insurers Axa SA, Legal & General Group PLC, Pension Corp., Prudential PLC and Swiss Re, aims to replicate the success of insurance-linked securities markets. These enable insurers to pass on some of the risk from unforseen events, such as natural disasters, to outside investors like hedge funds.” Seems fitting, since hedge funds bought into the supbprime mortgage market near the top, why not see if we can have them hold the bag one more time?

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