DISCUSSION PAPER PI-1305

Longevity Insurance Annuities: Lessons from the United Kingdom

Recent U.S. Treasury Department proposals have focused attention on longevity insurance
annuities. These are deferred annuities that began payment at advanced older ages, such as at age
82. While the United Kingdom has by far the world’s largest annuity market, and some insurance
companies used to provide longevity insurance annuities, currently no companies provide these
annuities. The main reason this change has occurred is that proposed European Union regulations
will require insurance companies to increase their reserves for these annuities in recognition that
there is no asset available to effectively hedge the risk of unexpectedly large improvements in
life expectancy.

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