GLOBAL - Exchange-traded funds (ETFs) could be used for trading longevity once the market becomes sufficiently liquid, Deutsche Börse has suggested.
Addressing delegates at the Longevity Seven conference in Frankfurt last week, Hendrik Rogge, responsible for the company's Xpect longevity indices, also said trading would be limited to such funds and future contracts, as regular trading would be impractical due to the monthly release of new data.
He added that introducing ETFs was a "possible solution" toward making longevity risk more tradable, but that other stumbling blocks remained.
Asked when the market would be liquid, Rogge conceded it was something Deutsche Börse would also like answered.
"I've been calculating indices for four years now, and we've seen remarkable improvements over the last few years, but it's absolutely impossible to give you some insight," he said.
He said there was interest in trading, but that it was "hard to find a first mover" to commit to a first trade.
"I don't think we will see day traders on longevity indices because changes occur on a monthly basis," he said when asked about such a possibility.
"It will be hard to find a day trader willing to trade within the days we publish these indices. Having ETFs - yes. I think it is a possible solution."
Instead, Rogge argued that, once the market became more liquid, products on exchange could include futures contracts, as well as ETFs.
Speaking at the same conference, Prudential Retirement's senior vice-president and head of longevity reinsurance predicted longevity risk transfers would become increasingly common in defined benefit (DB) territories, as they followed the UK example of more transparent disclosure of risk, as well as stricter funding regulations.
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