"Moshe Milevsky, a professor at the Schulich School of Business at York University in Toronto, is one of the world’s foremost experts on the subject of retirement. A prolific author, Milevsky’s latest book examines an old financial instrument that fell from favor: tontines. In the book, Milevsky makes the case that tontines, with a little tweaking, just might solve — better than investments or insurance — one of retirement’s biggest risks: longevity, the risk of outliving your assets. Below, Milevsky answered our questions about King William’s Tontine: Why The Retirement Annuity of the Future Should Resemble Its Past."
"In his new book, “King William's Tontine: Why the Retirement Annuity of the Future Should Resemble Its Past,” Moshe Milevsky argues convincingly that retirees have a product problem. Today's financial marketplace of investment and insurance products doesn't offer the perfect solution. To find that solution, he goes on an archeological dig in Renaissance Europe and unearths the tontine. Cast away years ago, the tontine may hold secrets to solving the income puzzle faced by retirees looking for a private sector solution to replace employer pensions."
"The buy-side share of the derivatives business has grown to record levels over the last decade, as they use derivatives in significant volumes to hedge risks or tap hard-to-access investments. But will this work be curtailed due to the clutch of new market regulations on the horizon?"
"On Wednesday, the Organization for Economic Cooperation and Development, a Paris-based think tank said extremely low rates fueled by quantitative easing from global central banks are a serious threat to the solvency of pension funds and life insurers. That’s a message investors have heard from bond guru Bill Gross, and the International Monetary Fund. And it’s even been acknowledged by European Central Bank President Mario Draghi."
"Pension Insurance Corporation (PIC) has entered into a £1.6 billion longevity reinsurance transaction with the Prudential Insurance Company of America (PICA), the second transaction between the two in recent months."
"This page is intended as an information resource to assist market participants in their contingency planning for the potential exit of one or more member states from the Eurozone. If a Eurozone exit event were to happen, details of any industry calls or meetings would be posted on this page."
"The extraterritorial application of EU and US derivatives regulation, which was designed for a western crisis, exposed the adverse impacts that global reforms can have on nascent capital markets in Asia. There is now widespread recognition that conflicting and duplicative derivatives rules fragment markets, distort competition, and reduce financial market participants' abilities to operate across borders – much to the detriment of Asia-Pacific financial markets."
Did the Dodd-Frank Act end ‘‘too-big-to-fail’’ (TBTF)? In this series of two posts, we look at this question through the lens of rating agencies and financial markets. Today we begin by discussing rating agencies’ views on this topic.
"New York’s banking regulator is probing an emerging benchmark trading scandal relating to the suspected manipulation of US interest rate swaps, according to people familiar with the matter. The Department of Financial Services investigation into the so-called Isdafix benchmark is in its early stages and has not yet honed in on particular banks, the people said."
"The latest BIS Annual Report, released on Sunday, cites numerous concerns about the unseen damage being caused to financial stability on account of ultra-low interest rates. Key among those concerns: how liquidity-guaranteeing ETFs in the bond sector may be contributing to a global liquidity illusion, disguising the true state of the ability to trade positions on the bond market — a topic very close to FT Alphaville’s heart."
"While the impact of low interest rates has not played out fully in the banking sector, it has already generated important headwinds for insurance companies. For one, the persistence of low rates has taken a toll on companies' profitability by depressing the yield on new investments. In parallel, new accounting rules for the discounting of future obligations have replaced the higher interest rates of the past - prevailing when contracts were signed - with the lower current rates, thus boosting the value of liabilities. Against this backdrop and despite favourable investor sentiment in equity markets, credit ratings signal concerns about insurers."
"A key question for policymakers is how to dispel liquidity illusion and support robust market liquidity. Market-makers, asset managers and other investors can take steps to strengthen their liquidity risk management and improve market transparency. Policymakers can also provide them with incentives to maintain robust liquidity during normal times to weather liquidity strains in bad times - for example, by encouraging regular liquidity stress tests. When designing stress tests, it is important to take into consideration that seemingly prudent individual actions may in fact exacerbate one-sided markets, and hence the evaporation of liquidity, if they imply similar positioning by a large number of market participants. Finally, it is vital that policymakers improve their understanding of liquidity amplification mechanisms and investor behaviour, especially in relatively illiquid markets."
"On June 18, a sunspot that had been rotating toward Earth for a few days unleashed the first in a series of solar eruptions, hurling a torrent of gas and magnetic field at our planet. When the coronal mass ejection reached Earth’s magnetosphere five days later, it spawned the most intense geomagnetic storm in the current solar cycle — powerful enough to push the northern lights as far south as Texas. The problem is we had no idea it was going to be that strong until it was already here."
"Dutch insurance, pensions and investments firm Delta Lloyd and Reinsurance Group of America (RGA) have entered into their second index-based longevity swap transaction, which again covers underlying longevity reserves of around €12 billion."
"Offloading emerging market (EM) currency risk in the interdealer market can take up to three times longer than in the past with significantly higher costs, as banks reduce their exposure to non-deliverable forwards (NDFs), traders say."
"Post-financial-crisis regulation has sharply reduced investors' freedom to buy and sell securities without affecting prices, according to many (many) market participants. Overheating in the bond market has exacerbated the problem, according to many others."
"A startup run by former Google Inc. and Nasdaq OMX Group Inc. employees is jumping into the competition to use digital-currency technology to tackle financial companies’ slow, antiquated back-office operations"