For insurers providing pension and annuity products, however, this trend also introduces a material financial risk, making longevity risk1 one of the most significant non-market risks on their balance sheet.
This article discusses longevity reinsurance as a means of managing this risk. We explore the economic rationale, the main features of longevity reinsurance transactions, their impact on solvency and capital, and recent developments in the Dutch and European market. While historically viewed as a risk mitigation tool, longevity reinsurance is increasingly used as a strategic instrument for balance sheet management, capital optimization, and business steering.
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