Longevity Risk Measurement of Life Annuity Products

Pauline Milaure Ngugnie Diffouo and Pierre Devolder
Additional contact information
Pauline Milaure Ngugnie Diffouo: Institute of Statistics, Biostatistics and Actuarial Sciences, Université Catholique de Louvain, 1348 Louvain-La-Neuve, Belgium
Pierre Devolder: Institute of Statistics, Biostatistics and Actuarial Sciences, Université Catholique de Louvain, 1348 Louvain-La-Neuve, Belgium

Risks, 2020, vol. 8, issue 1, 1-16

Abstract: This paper captures and measures the longevity risk generated by an annuity product. The longevity risk is materialized by the uncertain level of the future liability compared to the initially foretasted or expected value. Herein we compute the solvency capital (SC) of an insurer selling such a product within a single risk setting for three different life annuity products. Within the Solvency II framework, we capture the mortality of policyholders by the mean of the Hull–White model. Using the numerical analysis, we identify the product that requires the most SC from an insurer and the most profitable product for a shareholder. For policyholders we identify the cheapest product by computing the premiums and the most profitable product by computing the benefit levels. We further study how sensitive the SC is with respect to some significant parameters.

Keywords: solvency capital; life annuity; longevity risk; risk measurement (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-9091/8/1/31/pdf (application/pdf)
https://www.mdpi.com/2227-9091/8/1/31/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jrisks:v:8:y:2020:i:1:p:31-:d:334028

Access Statistics for this article

Risks is currently edited by Mr. Claude Zhang

More articles in Risks from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().