Longevity as an asset class has been in existence for a very long time. For years the major players have been institutions such as pension funds and insurance companies, which have had to manage the risk of people either living longer or shorter.

If people live longer than expected then the risk facing annuity and pension providers is that they will have to continue paying annuities and pensions for a longer period of time, thus increasing their costs. This is called longevity risk.

In contrast, life insurance companies can be exposed to mortality risk where people are living shorter than expected. In these cases, upon the death of the insured, the insurance company will stop receiving insurance premiums and have to pay out the death benefit resulting in a decrease in revenue.