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Indexed-based longevity risk transfer

\ˈɪndɛkst\-\beɪst\ \lɔnˈʤɛvəti\ \rɪsk\ \ˈtrænsfər\

A parametric risk transfer where the longevity risk that has been transferred relates to a given longevity index.

The advantage of entering into such a transfer would be to standardize the terms and reduce the cost of the risk transfer. This, in turn, would increase the appeal of a secondary market for such contracts, meaning it would be easier to unwind such contracts after the initial set up. For a pension plan entering into an indexed-based longevity risk transfer, any difference between the survivorship of a plan’s population and the survivorship of the population underlying the longevity index would remain an uninsured risk in the plan.

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