Valuation of longevity-linked life annuities

Bravo, Jorge Miguel; Freitas, Najat El Mekkaoui de

doi:10.1016/j.insmatheco.2017.09.009

Cited by 36 publications

(40 citation statements)

References 47 publications

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“…Model 17has been investigated by Denuit et al (2011) and Bravo & de Freitas (2018), who also consider bounds like 14. Concerning the choice of the population, we note that index-based solutions are more suitable for insurance arrangements.…”

Section: Longevity Linking By Means Of the Survival Probabilitymentioning

confidence: 99%

“…We are aware that a traditional theoretical measure expressing the value of the annuity to the individual is the expected utility (which, in the framework of longevity-linked structures, has been considered, e.g. by Valdez et al 2006;Stamos 2008;Donnelly et al 2013;Maurer et al 2013;Milevsky & Salisbury 2015;Bravo & de Freitas 2018;Chen et al 2019). We do not perform an assessment in this respect because we prefer to address quantities which are easier to understand by the individual.…”

Section: Valuation In the Individual's Perspectivementioning

confidence: 99%

“…Annuity designs in which the benefit amount is subject to updating based on the mortality/longevity experience have been named in different ways in the literature: adaptive algorithmic annuities by Lüthy et al (2001), longevity-indexed life annuities by Denuit et al (2011), longevitycontingent life annuities by Denuit et al (2015), mortality-indexed annuities by Richter & Weber (2011), and longevity-linked life annuities by Bravo & de Freitas (2018). Also, different adjustment coefficients of the benefit amount have been considered.…”

Section: Introductionmentioning

confidence: 99%

“…A similar choice is made by Denuit et al (2015), who consider the expected lifetime, that is to say the actuarial value of the annuity at a 0% discount rate. Denuit et al (2011) and Bravo & de Freitas (2018) adopt the ratio between the expected survival probability and the proportion of survivors observed in a reference population. Richter & Weber (2011) consider the ratio between the available reserve and the actuarial value of the annuity updated to observed mortality.…”

Section: Introductionmentioning

confidence: 99%

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Linking annuity benefits to the longevity experience: alternative solutions

Olivieri

Pitacco

2020

Ann. actuar. sci.

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The uncertainty regarding financial returns and the life expectancy, joint to the reduced social security benefits, increasingly expose individuals to the risk of outliving their post-retirement assets. However, the demand for longevity guarantees remains low, due to high costs. The providers, on their side, may be reluctant to offer non-adjustable longevity guarantees, as the risk is long term and difficult to predict. It is therefore convenient to reconsider the design of longevity guarantees. In particular, a participating structure, providing a link to some longevity experience, could allow a sharing of losses, and possibly profits, resulting in a reduction of the cost of the retained guarantee. The literature review suggests a number of alternatives to define a longevity-linking arrangement, but the topic is not yet completely explored. It is useful, in particular, to have a common framework, under which the various solutions can be interpreted and compared, also with a view to the trade-off between the retained risk and the cost of the guarantee. Developing a general structure describing longevity-linked post-retirement benefits is the main purpose of this paper. Allowing for aggregate longevity risk, we then examine suitable solutions for insurance products.

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Section: Longevity Linking By Means Of the Survival Probabilitymentioning

confidence: 99%

Section: Valuation In the Individual's Perspectivementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Linking annuity benefits to the longevity experience: alternative solutions

Olivieri

Pitacco

2020

Ann. actuar. sci.

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show abstract

“…Este mecanismo de reequilíbrio automático destina-se a ajustar automaticamente a relação entre os activos e as responsabilidades do sistema, repartindo equitativamente os custos do ajustamento entre as gerações activas e reformadas e evitando a acumulação de défices no sistema e a transferência de responsabilidades não fundeadas para as gerações futuras. Alternativamente, podem ser introduzidas rendas com partilha de risco entre o «annuity provider» e o beneficiário (Bravo, Corte-Real e Silva, 2009;Alho, Bravo & Palmer, 2012;Bravo & Freitas, 2018;Bravo 2019a,b).…”

Section: Organização E Funcionamento Do Sistemaunclassified