Lifecycle Portfolio Choice with Systematic Longevity Risk and Variable Investment-Linked Deferred Annuities

Vasily Kartashov, Raimond Maurer, Olivia Mitchell and Ralph Rogalla

No 17505, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper assesses the impact of variable investment-linked deferred annuities (VILDAs) on lifecycle consumption, saving, and portfolio allocation patterns given stochastic and systematic mortality. Insurers have taken two approaches to manage systematic mortality risks, namely self-insurance and risk transfer to purchasers of the annuity products. We demonstrate that self-insurance leads to high loadings, so that households offered a choice would favor the risk transfer scheme. Reservation loadings on the actuarially fair VILDA price for non-participation are 0.5-8%; if insurers cannot hedge within this range, they will transfer systematic longevity risks to the annuitants. Our findings have implications for new payout products that may be attractive to older households seeking to protect against retirement shortfalls.

JEL-codes: G11 G2 G22 G23 H55 I3 (search for similar items in EconPapers)
Date: 2011-10
New Economics Papers: this item is included in nep-age and nep-cis
Note: AG LS PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published as Raimond Maurer & Olivia S. Mitchell & Ralph Rogalla & Vasily Kartashov, 2013. "Lifecycle Portfolio Choice With Systematic Longevity Risk and Variable InvestmentâLinked Deferred Annuities," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 80(3), pages 649-676, 09.

Downloads: (external link)
http://www.nber.org/papers/w17505.pdf (application/pdf)

Related works:
Journal Article: Lifecycle Portfolio Choice With Systematic Longevity Risk and Variable Investment—Linked Deferred Annuities (2013)
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:nbr:nberwo:17505

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w17505

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().