Uniqueness of the Fair Premium for Equity-Linked Life Insurance Contracts

J. Aase Nielsen () and Klaus Sandmann
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J. Aase Nielsen: Department of Operations Research, University of Aarhus, Bldg. 530, Ny Munkegade DK-8000 Aarhus C, Denmark.

The Geneva Risk and Insurance Review, 1996, vol. 21, issue 1, 65-102

Abstract: An equity-linked life insurance contract combines an endowment life insurance and an investment strategy with a minimum guarantee. The benefit of this contract is determined by the guaranteed amount plus a bonus equal to a call on the portfolio. This bonus is similar to an Asian option. This article analyzes the relationship between the periodic insurance premium and its proportional share invested into the portfolio. For a general model of the financial risks we show the existence and uniqueness of an insurance premium. Furthermore the premium is strictly increasing and convex as a function of the share invested. The Geneva Papers on Risk and Insurance Theory (1996) 21, 65–102. doi:10.1007/BF00949051

Date: 1996
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