Deutsche Bank, Aegon in longevity swap

Bank, and Aegon have agreed a $16 billion longevity swap, the largest public deal so far, Insurance ERM reports.

Longevity risk transfer to the capital markets has proven difficult in the past because of investor reluctance to accept the major uncertainties inherent in longevity risk, according to catastrophe modelling firm Risk Management Solutions, which conducted mortality and longevity risk analysis for the deal.

The swap, revealed during Aegon's results, is significant for two reasons - its size, and the fact that Deutsche says it has managed to pass its resulting exposure to longer Dutch life expectancy on to third parties - said anonymous financial investors in the capital markets, Financial News states.

“Deutsche Bank continues to use its extensive experience in longevity risk management to address complexities of the economic, regulatory and market environment faced by both our clients and investors,” says Clare Hennings, Deutsche Bank head of structured insurance solutions, in an HFM Week report.

“We believe this market will continue to grow as insurance companies and pension funds look at new ways to manage their liabilities while investors seek diversified investment opportunities,” adds Hennings.