Individual post-retirement longevity risk management under systematic mortality risk

Katja Hanewald, John Piggott and Michael Sherris

Insurance: Mathematics and Economics, 2013, vol. 52, issue 1, 87-97

Abstract: This paper analyzes an individual’s post-retirement longevity risk management strategy allowing for systematic longevity risk, recent product innovations, and product loadings. A complete-markets discrete state model and multi-period simulations of portfolio strategies are used to assess individual longevity insurance product portfolios with different levels of systematic and idiosyncratic longevity risk. Portfolios include: fixed life annuities, deferred annuities, inflation-indexed annuities, phased withdrawals and recently proposed group self-annuitization (GSA) plans. GSA plans are found to replace even inflation-indexed annuity products when there are loadings on guaranteed life annuity products. With a bequest motive and loadings, coinsurance portfolio strategies with phased withdrawals and GSA’s dominate portfolios with life annuities or deferred annuities.

Keywords: Longevity risk; Optimal insurance; Life annuity; Group self-annuitization (GSA); Market frictions (search for similar items in EconPapers)
JEL-codes: D14 E21 G22 G23 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Related works:
Working Paper: Individual Post-Retirement Longevity Risk Management Under Systematic Mortality Risk (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:52:y:2013:i:1:p:87-97

DOI: 10.1016/j.insmatheco.2012.11.002

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