The Impact of Longevity and Investment Risk on a Portfolio of Life Insurance Liabilities
| Autor: | Anna Rita Bacinello, Pietro Millossovich, An Chen |
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| Přispěvatelé: | Bacinello, ANNA RITA, Millossovich, Pietro, Chen, An |
| Jazyk: | angličtina |
| Rok vydání: | 2018 |
| Předmět: |
Statistics and Probability
Economics and Econometrics Solvency Longevity risk Investment risk Fair valuation Participating life insurance 01 natural sciences HG 010104 statistics & probability Life insurance 0502 economics and business Systematic risk Economics 0101 mathematics Market value Financial services 050208 finance Actuarial science business.industry Financial risk 05 social sciences Life annuity HD61 Portfolio Statistics Probability and Uncertainty business |
| ISSN: | 2190-9733 |
| Popis: | In this paper we assess the joint impact of biometric and financial risk on the market valuation of life insurance liabilities. We consider a stylized, contingent claim based model of a life insurance company issuing participating contracts and subject to default risk, as pioneered by Briys and de Varenne (Geneva Pap Risk Insur Theory 19(1):53–72, 1994, J Risk Insur 64(4):673–694, 1997), and build on their model by explicitly introducing biometric risk and its components, namely diversifiable and systematic risk. The contracts considered include pure endowments, deferred whole life annuities and guaranteed annuity options. Our results stress the predominance of systematic over diversifiable risk in determining fair participation rates. We investigate the interaction of contract design, market regimes and mortality assumptions, and show that, particularly for lifelong benefits, the choice of the participation rate must be very conservative if longevity improvements are foreseeable. |
| Databáze: | OpenAIRE |
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