 Individual Annuity Demand Under Aggregate Mortality RiskRoman N. Schulze and Thomas Post Journal of Risk & Insurance, 2010, vol. 77, issue 2, 423-449 Abstract: Aggregate mortality risk—the risk that the mortality trend in a population changes in a nondeterministic way—and its implications for corporate decisions has recently been the subject of lively scientific discussion. We show that aggregate mortality risk is also a key determinant for individual annuitization decisions. Aggregate mortality risk appears to be a risk very difficult to transfer for individuals. Whether its existence leads to a higher or lower annuity demand depends on objective factors (e.g., insurers’ vulnerability to aggregate mortality changes). Subjective factors (i.e., individuals’ preferences) determine only the intensity of the annuity demand reaction to aggregate mortality risk. Our results are of significant importance not only for financial planning approaches of individual annuity buyers but also for strategic decisions in insurance companies and for solvency regulators. Furthermore, consideration of aggregate mortality risk may alleviate, but also intensify, the annuity puzzle. Date: 2010 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:jrinsu:v:77:y:2010:i:2:p:423-449 Ordering information: This journal article can be ordered from Access Statistics for this article Journal of Risk & Insurance is currently edited by Joan T. Schmit More articles in Journal of Risk & Insurance from The American Risk and Insurance Association Contact information at EDIRC. |
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