Abstract
AbstractThis article provides a formal analysis of payout adjustments from a longevity risk‐pooling fund, an arrangement we refer to as group self‐annuitization (GSA). The distinguishing risk diffusion characteristic of GSAs in the family of longevity insurance instruments is that the annuitants bear their systematic risk, but the pool shares idiosyncratic risk. This obviates the need for an insurance company, although such instruments could be sold through a corporate insurer. We begin by deriving the payout adjustment for a single entry group with a single annuity factor and constant expectations. We then show that under weak requirements a unique solution to payout paths exists when multiple cohorts combine into a single pool. This relies on the harmonic mean of the ratio of realized to expected survivorship rates across cohorts. The case of evolving expectations is also analyzed. In all cases, we demonstrate that the periodic‐benefit payment in a pooled annuity fund is determined based on the previous payment adjusted for any deviations in mortality and interest from expectations. GSA may have considerable appeal in countries which have adopted national defined contribution schemes and/or in which the life insurance industry is noncompetitive or poorly developed.
Paper version not known (
Free)
Published Version
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
