The risk of a systematic and unforeseen improvement in longevity striking all annuitants at once, non-diversifiable, the demographic equivalent of catastrophe.
Two often-conflated risks must be distinguished. Level risk is that of being wrong about the average life expectancy of a generation, it is diversifiable and corrects through observation. Trend risk is that of a systematic and unforeseen improvement in longevity, a therapeutic advance suddenly lengthening all the lives of a cohort, and that one is not diversifiable, for it strikes all annuitants at once. It is the accumulation risk proper to longevity, the demographic equivalent of natural catastrophe, which is why insurers seek to transfer it to reinsurance or capital markets. It becomes the central risk of life insurance as it is becoming.
On a death benefit, an insured who lives longer pays more premiums, the error works for the insurer, on an annuity, the same error works against it.
risque de tendance de longévité, trend risk