David Colinson, Partner and Co-Head of Origination at Pension Corporation, talks to Finance IQ about developments in the longevity market.
Finance IQ: Can you give us an overview of the macro issues affecting Longevity Hedging and the impact that this is having on DB schemes.
D Colinson: I think the key issues are the classic ones of demand, supply and price. On pricing, the key issue is, can hedging be provided at a price that the pension schemes, be it trustees or their sponsors, are willing to pay, which drives into is there demand to do it. Secondly, can the market continue to supply the capacity to meet that demand? I think one of the issues, on the demand side, is do the trustees and companies really understand what they are buying and hence have a drive to go out and research and purchase Longevity Hedging. And, particularly at the moment, given that people have limited time resources, are they focusing more on other things that appear more immediate, such as dealing with their asset liability management strategy in the area of hedging, interest rates, inflation and managing investment risk.
Finance IQ: Some good points there. A good summary. 2011 has only seen one longevity transaction carried out by ITV. What do you think the reasons are behind this?
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The European De-risking Longevity Forum 2011 will take place on 5th December in London. For information please visit www.europeanlongevityrisk.com, email enquire@iqpc.co.uk or call 0800 652 2363.
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