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Natural immunization of an insurance portfolio against longevity risk

Arkadiusz Filip
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Arkadiusz Filip: Szkoła Główna Handlowa w Warszawie

Collegium of Economic Analysis Annals, 2018, issue 51, 63-92

Abstract: The aim of the article is the analysis of the possibilities for natural immunization of an insurance portfolio against longevity risk. Since different insurance products are impacted by increasing life expectancy of policyholders in a different way (life annuity payments increase, whereas payment due to life insurance policies decrease), there is a possibility of determining the portfolio structure in a way minimising the risk of the changes in the value of the total portfolio. The article presents a model built by the author, which can be used in order to determine the optimal portfolio structure. The efficiency of this model to hedge against longevity risk is then compared to other methods proposed in the literature of natural immunization. The comparison is performed with the use of historical changes in mortality in Poland based on official mortality tables published by the Central Statistical Office (GUS).

Keywords: longevity risk; immunization; mortality tables; life insurance; life annuity; duration (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:sgh:annals:i:51:y:2018:p:63-92