Abstract

In portfolios of life annuity contracts, the payments made by an annuity provider (an insurance company or a pension fund) are driven by the random number of survivors. This paper aims to provide accurate approximations for the present value of the payments made by the annuity provider. These approximations account not only for systematic longevity risk but also for the diversifiable fluctuations around the unknown life table. They provide the practitioner with a useful tool avoiding the problem of simulations within simulations in, for instance, Solvency 2 calculations, valid whatever the size of the portfolio.

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