Securitization of life insurance policies

In this paper we develop, price, and analyze a securitization structure of life insurance policies. By transferring term insurance policies to a special purpose vehicle, all risk is transferred from insurers to the capital market. With mortality rates as the only underlying source of uncertainty, the structure is easy to analyze. We calibrate our model to the Swiss Re/Vita III-deal and find that insurers may transfer mortality risk to the capital market at a reasonable cost.