The Cass Business School and pension consultants Hymans Robertson have won a joint bid for the Longevity Basis Risk Quantification research project.
As part of the study, researchers will develop a method of assessing basis risk for longevity transactions. Cass Business School, part of City University London, and Hymans Robertson announced the successful bid this week for the project for the Longevity Basis Risk Working Group (LBRWG).
The project is funded by the Institute and Faculty of Actuaries (IFoA) and the Life and Longevity Markets Association (LLMA) who founded the LBRWG in 2012.
A problem facing insurance companies and pension schemes is the measurement of the basis risk arising from the use of population-based mortality indices for managing the longevity risk inherent in specific blocks of pension benefits or annuitant liabilities.
Cass and Hymans Robertson will aim to develop a readily-applicable methodology to quantify this basis risk.
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Dan Ryan, spokesman for the LLMA, said: "With the help of Cass and Hymans Robertson, the Life and Longevity Markets Association believes that this project will go a long way to develop market clarity and support our brief to grow this marketplace. The resulting research will hopefully bring a real and quantifiable solution to the issue of Longevity Risk."
Lead researcher and Cass Dean Professor Steven Haberman said: "This project offers us a great opportunity to bring together the School's strengths – academic excellence and practical industry knowledge.
"We will be using statistical knowledge and original research to produce a solution to a real industry problem. We look forward to working closely with our partners Hymans Robertson on this project."
Andrew Gaches, partner at Hymans Robertson, said: "We are excited about working with Cass Business School to create a new, practical methodology that will help pension schemes and insurers assess the benefits of index-based longevity solutions, and enable them to make the best decisions for managing longevity risk."