Longevity Swap

Categories: Finance,

A longevity swap is a derivative contract that offsets insurance companies' or pension funds' risks of their policyholders living longer than expected.Longevity swap is an insurance program for the financial institutes or funds. A third party (insurance company, for example) will insure the pension fund or annuity fund based on the current predicted life expectancy. If life expectancy increases dramatically, the insurance policy kicks in to cover the extra pay-outs.