People are living longer — and that's bad news for some companies' bottom lines.
As pension plans incorporate new life-expectancy estimates into their calculations, investors are glimpsing the financial fallout from aging societies.
"2014 was a tough year for pension plan sponsors," said
To avoid ballooning costs from years of additional pension checks, some companies are paying insurers to take over their plans. Life insurers see the longevity deals, which expose them to financial risk if people live too long, as balancing their existing exposure to paying if customers die too soon.
Dozens of additional deals are likely this year. In a
Demand for such pension risk transfer deals eventually will eclipse the insurance industry's capacity and provide an opening for investment banks to sell securities known as "death derivatives," some experts say.
"The capital markets are going to have to come in because there's not enough capacity from insurers and reinsurance companies," said
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