Managing longevity and disability risks in life annuities with long term care

Susanna Levantesi and Massimiliano Menzietti ()

Insurance: Mathematics and Economics, 2012, vol. 50, issue 3, 391-401

Abstract: The aim of the paper is twofold. Firstly, it develops a model for risk assessment in a portfolio of life annuities with long term care benefits. These products are usually represented by a Markovian Multi-State model and are affected by both longevity and disability risks. Here, a stochastic projection model is proposed in order to represent the future evolution of mortality and disability transition intensities. Data from the Italian National Institute of Social Security (INPS) and from Human Mortality Database (HMD) are used to estimate the model parameters. Secondly, it investigates the solvency in a portfolio of enhanced pensions. To this aim a risk model based on the portfolio risk reserve is proposed and different rules to calculate solvency capital requirements for life underwriting risk are examined. Such rules are then compared with the standard formula proposed by the Solvency II project.

Keywords: Markovian multi-state model; Longevity risk; Disability risk; Solvency II; Internal models (search for similar items in EconPapers)
JEL-codes: G22 J11 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:50:y:2012:i:3:p:391-401

DOI: 10.1016/j.insmatheco.2012.01.004

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