It is clear that the asset class comprised of life insurance related products that carry longevity risk cannot be valued based on typical financial measures. Specifically, the returns and yields so commonly bantered about amongst the ‘players’ have absolutely no meaning, because they are based on a flawed assumption that permeates the entire process: the FALSE premise that one knows when an individual is going to die. Nothing could be farther from the truth, nothing could be more difficult (nigh impossible) to predict, and this extremely dangerous assumption creates the illusion that the numbers spun by these ‘players’ can be used to make decisions. Recent events in the Mortgage Market (for those of shorter memory) as well as countless past collapses attest to just how dangerous these assumptions are.

It is clear, then, that the only number that really matters in this asset class is volatility-of-life-expectancy (VOLE). Because the experience that is publicly available is restricted to Official Census Data, special studies such as TOAMS, and the mortality tables prepared by the SOA, there are some caveats that must be observed.