The first international public index for measuring death rates will be unveiled Monday by JPMorgan in a move that could help turn longevity risk into a new frontier of financial innovation. The index, which has been drawn up in association with Watson Wyatt, the pension consultants, and Cass Business School in London, will offer a uniform industry scheme for measuring death rates – and thus longevity levels – in the US and UK. It comes at a time when the issue of longevity risk is attracting attention and triggering innovation from the financial industry.
If these indices become accepted as a benchmark, it could spur the creation of securities and derivatives linked to longevity risk, JPMorgan argues. And in an effort to accelerate this process, the US bank is appealing to other financial groups to co-operate in developing industry standards. Patrik Edsparr, JPMorgan’s global head of rates, says the investment bank believes the new index will facilitate the development of a market in tradeable longevity risk.