A Model-Point Approach to Indifference Pricing of Life Insurance Portfolios with Dependent Lives

Blanchet-Scalliet, Christophette; Dorobantu, Diana; Salhi, Yahia

doi:10.1007/s11009-017-9611-2

Cited by 6 publications

(5 citation statements)

References 19 publications

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“…Medical breakthroughs and environmental features are suggested factors associated with dependence structures between the lifetimes of individuals within a population. When restricting the model by Blanchet-Scalliet et al (2019) to consider just two policyholders, the surviving policyholder is said to experience a jump in mortality intensity when the other dies, in line with the assumption of the model proposed in this paper.…”

Section: Indifference Price Calculation For a Joint-life Insurance Prmentioning

confidence: 70%

Stochastic Mortality Modelling for Dependent Coupled Lives

Henshaw

Constantinescu

Pamen

2020

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Broken-heart syndrome is the most common form of short-term dependence, inducing a temporary increase in an individual’s force of mortality upon the occurrence of extreme events, such as the loss of a spouse. Socioeconomic influences on bereavement processes allow for suggestion of variability in the significance of short-term dependence between couples in countries of differing levels of economic development. Motivated by analysis of a Ghanaian data set, we propose a stochastic mortality model of the joint mortality of paired lives and the causal relation between their death times, in a less economically developed country than those considered in existing studies. The paired mortality intensities are assumed to be non-mean-reverting Cox–Ingersoll–Ross processes, reflecting the reduced concentration of the initial loss impact apparent in the data set. The effect of the death on the mortality intensity of the surviving spouse is given by a mean-reverting Ornstein–Uhlenbeck process which captures the subsiding nature of the mortality increase characteristic of broken-heart syndrome. Inclusion of a population wide volatility parameter in the Ornstein–Uhlenbeck bereavement process gives rise to a significant non-diversifiable risk, heightening the importance of the dependence assumption in this case. Applying the model proposed to an insurance pricing problem, we obtain the appropriate premium under consideration of dependence between coupled lives through application of the indifference pricing principle.

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Section: Indifference Price Calculation For a Joint-life Insurance Prmentioning

confidence: 70%

Stochastic Mortality Modelling for Dependent Coupled Lives

Henshaw

Constantinescu

Pamen

2020

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“…However, even if the recent literature considered these different stylized facts, the common approach is still based on a static development and does not tackle the dynamic aspect either of the dependency between the spouse neither the broken-heart syndrome. In Blanchet-Scalliet et al [5], a first approach is developed to handle these aspects and propose a framework with a dependence structure governed by a Farlie-Gumbel-Morgenstern copula in a dynamic setting. The proposed approach is based on dynamic characterization of the joint density, which convenient for modeling the dependency of deaths among a population not only from a theoretical point of view but also for a practical use.…”

Section: Introductionmentioning

confidence: 99%

“…This amounts to saying that one individual's intensity will have a jump when the other individual is deceased. However, in [5] the framework assumes a symmetric reaction the considered individuals. In fact, the investigation of the dependence as well as the broken-heart syndrome exhibit an asymmetric behavior between the coupled lifetimes [18].…”

Section: Introductionmentioning

confidence: 99%

Dynamic Bivariate Mortality Modelling

Jiao

Salhi

Wang

2022

Methodol Comput Appl Probab

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The dependence structure of the life statuses plays an important role in the valuation of life insurance products involving multiple lives. Although the mortality of individuals is well studied in the literature, their dependence remains a challenging field. In this paper, the main objective is to introduce a new approach for analyzing the mortality dependence between two individuals in a couple. It is intended to describe in a dynamic framework the joint mortality of married couples in terms of marginal mortality rates. The proposed framework is general and aims to capture, by adjusting some parametric form, the desired effect such as the "broken-heart syndrome". To this end, we use a well-suited multiplicative decomposition, which will serve as a building block for the framework and thus will be used to separate the dependence structure from the marginals. We make the link with the existing practice of affine mortality models. Finally, given that the framework is general, we propose some illustrative examples and show how the underlying model captures the main stylized facts of bivariate mortality dynamics.

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“…In these papers the Black & Scholes pricing methodology is applied under the hypotheses of market completeness and independence between financial and insurance setting. Since then, many efforts have been done to relax the assumption of completeness and several approaches have been proposed, for instance in Møller [38], Ludkovski and Young [37], Bayraktar et al [2], Delong [22], Blanchet-Scalliet et al [8]. However the problem of incorporating some kind of dependence between the financial and the insurance market, which is empirically observed, has started to be addressed only recently.…”

Section: Introductionmentioning

confidence: 99%