 A utility-based comparison of pension funds and life insurance companies under regulatory constraintsDirk Broeders, An Chen and Birgit Koos Insurance: Mathematics and Economics, 2011, vol. 49, issue 1, 1-10 Abstract: This paper compares two different types of annuity providers, i.e. defined benefit pension funds and life insurance companies. One of the key differences is that the residual risk in pension funds is collectively borne by the beneficiaries and the sponsor's shareholders while in the case of life insurers it is borne by the external shareholders. First, this paper employs a contingent claim approach to evaluate the risk return tradeoff for annuitants. For that, we take into account the differences in contract specifications and in regulatory regimes. Second, a welfare analysis is conducted to examine whether a consumer with power utility experiences utility gains if she chooses a defined benefit plan or a life annuity contract over a defined contribution plan. We demonstrate that regulation can be designed to support a level playing field amongst different financial institutions. Keywords: Pension; plans; Annuities; Barrier; options; Contingent; claim; approach; Certainty; equivalents (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:49:y:2011:i:1:p:1-10 Access Statistics for this article Insurance: Mathematics and Economics is currently edited by R. Kaas, Hansjoerg Albrecher, M. J. Goovaerts and E. S. W. Shiu More articles in Insurance: Mathematics and Economics from Elsevier |
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