Definition
Mortality-contingent redistribution is the mechanism by which a longevity pool's governing rules determine how the capital of a deceased member is allocated among surviving members, making income distributions contingent on the mortality experience of the pool rather than fixed at inception.
Why it matters
Mortality-contingent redistribution is what separates a longevity pool from both a fixed annuity and a solo drawdown arrangement. In a fixed annuity, the insurer guarantees income regardless of actual mortality experience — the individual's income is fixed at inception and the insurer absorbs the mortality risk. In solo drawdown, there is no redistribution — capital remains with the individual until consumed or bequeathed. Mortality-contingent redistribution is the structural mechanism that makes pooling different from both: income is not fixed, and it is not self-managed — it rises or falls with the mortality experience of the pool, and the redistribution is automatic and actuarially determined.
How it works
The redistribution rule is a governance variable — different longevity pools use different rules, and the choice of rule affects both the individual's survivor credit and the pool's actuarial fairness properties. Common redistribution rules include: pro-rata by account balance (each survivor receives a share of the deceased member's assets proportional to their own balance), equal share (each survivor receives an identical amount regardless of balance), and actuarially weighted rules that adjust for age, gender, or health status. The redistribution rule is established in the pool's governance documents and does not change unilaterally — it is one of the structural features that fixes pool behavior independently of individual members. The contingency is the key property: because redistribution depends on when deaths actually occur, income in a longevity pool is path-dependent at the pool level in a way that responds automatically to actual mortality experience, without requiring any individual decision.
In practice
For an individual evaluating a longevity pool, the redistribution rule is a governance detail with material consequences. A pro-rata rule benefits members with larger account balances; an equal-share rule treats all surviving members identically regardless of balance; an actuarially weighted rule attempts to ensure each member receives a fair actuarial share relative to their mortality expectation. Asking a pool operator to disclose the redistribution rule — and to explain its actuarial fairness properties — is a basic due diligence question. The answer determines how survivor credits are calculated and how equitably the mortality credit is shared among members of different ages or health status.
In the Longevity Standard Framework
Mortality-contingent redistribution is supporting vocabulary in the Longevity Standard framework. It is the mechanism-level vocabulary that underlies the adjustment-mechanism property value automatic-actuarial in the claim framework: when a longevity pool's adjustment mechanism is described as automatic-actuarial, the structural mechanism producing that property is mortality-contingent redistribution. Mortality-contingent redistribution is also the mechanism that produces survivor credits for individual members and mortality credits at the pool level.
Related terms
- Adjustment mechanism
- Mortality credit
- Survivor credit
- Longevity pool
- Pool governance
- Tontine structure (Longevity Standard context)
- Actuarial fairness
- Risk sharing