Accounting and Actuarial Smoothing of Retirement Payouts in Participating Life Annuities

Raimond Maurer, Olivia Mitchell, Ralph Rogalla and Ivonne Siegelin

No 20124, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Life insurers use accounting and actuarial techniques to smooth reporting of firm assets and liabilities, seeking to transfer surpluses in good years to cover benefit payouts in bad years. Nevertheless, these techniques been criticized as they make it difficult to assess insurers' true financial status. We develop stylized and realistically-calibrated models of participating lifetime annuities, an insurance product that pays retirees guaranteed lifelong benefits along with variable non-guaranteed surplus. Our goal is to illustrate how accounting and actuarial techniques for this type of financial contract shape policyholder wellbeing, along with insurer profitability and stability. Smoothing adds value to both the annuitant and the insurer, so curtailing smoothing could undermine the market for long-term retirement payout products.

JEL-codes: G22 J14 J32 M41 (search for similar items in EconPapers)
Date: 2014-05
New Economics Papers: this item is included in nep-ias
Note: AG
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Citations: View citations in EconPapers (3)

Published as Maurer, Raimond & Mitchell, Olivia S. & Rogalla, Ralph & Siegelin, Ivonne, 2016. "Accounting and actuarial smoothing of retirement payouts in participating life annuities," Insurance: Mathematics and Economics, Elsevier, vol. 71(C), pages 268-283.

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Journal Article: Accounting and actuarial smoothing of retirement payouts in participating life annuities (2016)
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