A security transferring longevity risk to the capital markets, of which no issuance has ever succeeded despite several attempts.
The longevity bond is a security intended to transfer longevity risk to capital-market investors, on the model of catastrophe bonds. Its historical singularity is failure, for no issuance has ever succeeded, despite serious attempts such as the European Investment Bank's in 2004 and the World Bank's in 2010, both cancelled for lack of interest on both sides. This repeated failure is explained by the mismatch of maturities, the risk being measured in decades when the investor requires liquidity in years, by the absence of a natural counterparty in a one-sided market, and by a high basis risk between national tables and the longevity specific to each scheme. The longevity bond thus illustrates the limit of securitisation in the face of a trend risk rather than an event risk.
The European Investment Bank attempted in 2004 to issue a longevity bond, but cancelled it for lack of both buyers and sellers, no investor wishing to bet on the survival of a generation.
longevity bond, obligation de survie