Life annuity
View article: TONUITY: A NOVEL INDIVIDUAL-ORIENTED RETIREMENT PLAN
TONUITY: A NOVEL INDIVIDUAL-ORIENTED RETIREMENT PLAN Open
For insurance companies in Europe, the introduction of Solvency II leads to a tightening of rules for solvency capital provision. In life insurance, this especially affects retirement products that contain a significant portion of longevit…
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ON THE OPTIMAL COMBINATION OF ANNUITIES AND TONTINES Open
Tontines, retirement products constructed in such a way that the longevity risk is shared in a pool of policyholders, have recently gained vast attention from researchers and practitioners. Typically, these products are cheaper than annuit…
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Annuity payments can increase patient access to innovative cell and gene therapies under England’s net budget impact test Open
Background: Cell and gene therapies have the potential to provide therapeutic breakthroughs, but the high costs of researching, developing, manufacturing and delivering them translate into prices that may challenge healthcare budgets. Vari…
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Putting the pension back in 401(k) retirement plans: Optimal versus default deferred longevity income annuities Open
The US Treasury recently permitted deferred longevity income annuities to be included in pension plan menus as a default payout solution, yet little research has investigated whether more people should convert some of the $18 trillion they…
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Optimal retirement products under subjective mortality beliefs Open
Many empirical studies confirm that policyholder's subjective mortality beliefs deviate from the information given by publicly available mortality tables. In this study, we look at the effect of subjective mortality beliefs on the perceive…
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Survival Pessimism and the Demand for Annuities Open
The “annuity puzzle” refers to the fact that annuities are rarely purchased despite the longevity insurance they provide. Most explanations for this puzzle assume that individuals have accurate expectations about their future survival. We …
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How much do means-tested benefits reduce the demand for annuities? Open
Means-tested retirement benefits create incentives to cash out pension wealth. Individuals trade off the advantages from annuitization, receiving longevity risk insurance, to the disadvantages, giving up ‘free’ wealth in the form of means-…
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Unintended consequences of minimum annuity laws: An experimental study Open
The need to ensure that people have adequate savings for retirement has prompted debate among regulators and academics. Certain countries have implemented or are considering implementing mandatory minimum annuity laws (e.g., Singapore and …
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The Fragility of Market Risk Insurance Open
Variable annuities, which package mutual funds with minimum return guarantees over long horizons, accounted for $1.5 trillion or 35% of U.S. life insurer liabilities in 2015.Sales decreased and fees increased during the global financial cr…
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Lapse‐and‐Reentry in Variable Annuities Open
Section 1035 of the current U.S. tax code allows policyholders to exchange their variable annuity policy for a similar product while maintaining tax‐deferred status. When the variable annuity contains a long‐term guarantee, this “lapse‐and…
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Pricing longevity derivatives via Fourier transforms Open
Longevity-linked derivatives are one of the most important longevity risk management solutions for pension schemes and life annuity portfolios. In this paper, we decompose several longevity derivatives—such as geared longevity bonds and lo…
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Funding for longer lives. Retirement wallet and risk-sharing annuities Open
Longevity increases and population ageing create challenges for all societal institutions, particularly those providing retirement income, health care, and long-term care services. At the individual level, an obvious question is how to ens…
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Health State Transitions and Longevity Effects on Retirees’ Optimal Annuitization Open
The interplay between longevity risk and health state transitions for retirees’ optimal annuitization decisions is investigated. Using a life‐cycle framework incorporating wealth levels, bequest motives, and consumption floors created by g…
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Spouses’ Dependence across Generations and Pricing Impact on Reversionary Annuities Open
This paper studies the dependence between coupled lives, i.e., the spouses’ dependence, across different generations, and its effects on prices of reversionary annuities in the presence of longevity risk. Longevity risk is represented via …
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An investigation of time preferences, life expectancy, and annuity versus lump sum choices: Can smoking harm long-term saving decisions? Open
We exploit the fact that Israeli pension insurance policies do not take health conditions or smoking status into account in annuity pricing to investigate the potential effect of being a smoker on retirement payout choices. Contrary to the…
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MODERN LIFE-CARE TONTINES Open
The tendency of insurance providers to refrain from offering long-term guarantees on investment or mortality risk has shifted attention to mutual risk pooling schemes like (modern) tontines, pooled annuities or group self annuitization sch…
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Valuation of Large Variable Annuity Portfolios Using Linear Models with Interactions Open
A variable annuity is a popular life insurance product that comes with financial guarantees. Using Monte Carlo simulation to value a large variable annuity portfolio is extremely time-consuming. Metamodeling approaches have been proposed i…
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On age difference in joint lifetime modelling with life insurance annuity applications Open
Insurance and annuity products covering several lives require the modelling of the joint distribution of future lifetimes. In the interest of simplifying calculations, it is common in practice to assume that the future lifetimes among a gr…
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Individual Tontine Accounts Open
An individual tontine account (ITA) is similar to a conventional investment brokerage account, but with the added feature of mortality pooling through participation in an open-ended fair tontine. In showing them to be fair to all participa…
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Forecasting age distribution of death counts: an application to annuity pricing Open
We consider a compositional data analysis approach to forecasting the age distribution of death counts. Using the age-specific period life-table death counts in Australia obtained from the Human Mortality Database, the compositional data a…
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Late-in-Life Risks and the Under-Insurance Puzzle Open
Individuals face significant late-in-life risks, including needing long-term care (LTC). Yet, they hold little long-term care insurance (LTCI). Using both "strategic survey questions," which identify preferences, and stated demand question…
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Valuation of long-term care options embedded in life annuities Open
In most industrialised countries, one of the major societal challenges is the demographic change coming along with the ageing of the population. The increasing life expectancy observed over the last decades underlines the importance to fin…
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On the free boundary of an annuity purchase Open
It is known that the decision to purchase an annuity may be associated to an\noptimal stopping problem. However, little is known about optimal strategies, if\nthe mortality force is a generic function of time and if the `subjective' life\n…
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Optimal social security claiming behavior under lump sum incentives: Theory and evidence Open
Many Americans claim Social Security benefits early, though this leaves them with lower monthly payments throughout retirement. We build a lifecycle model that closely tracks claiming patterns under current rules, and we use it to predict …
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Hedging Longevity Risk in Life Settlements Using Biomedical Research‐Backed Obligations Open
In the life settlement market, mortality risk is transferred from life insurance policyholders to third‐party life settlement firms. This risk transfer occurs in conjunction with an information transfer that is relevant not only for pricin…
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TARGET VOLATILITY STRATEGIES FOR GROUP SELF-ANNUITY PORTFOLIOS Open
While the current pandemic is causing mortality shocks globally, the management of longevity risk remains a major challenge for both individuals and institutions. It is high time there be private market solutions designed for efficient lon…
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Frailty and Risk Classification for Life Annuity Portfolios Open
Life annuities are attractive mainly for healthy people. In order to expand their business, in recent years, some insurers have started offering higher annuity rates to those whose health conditions are critical. Life annuity portfolios ar…
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Fixed and variable longevity income annuities in defined contribution plans: Optimal retirement portfolios taking social security into account Open
This paper investigates retirees' optimal purchases of fixed and variable longevity income annuities using their defined contribution (DC) plan assets and given their expected social security benefits. As an alternative, we also evaluate u…
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Putting the Pension Back in 401(k) Plans: Optimal versus Default Longevity Income Annuities Open
Most defined contribution pension plans pay benefits as lump sums, yet the US Treasury has recently encouraged firms to protect retirees from outliving their assets by converting a portion of their plan balances into longevity income annui…
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Life Insurance and Annuity Demand under Hyperbolic Discounting Open
In this paper, we analyse and construct a lifetime utility maximisation model with hyperbolic discounting. Within the model, a number of assumptions are made: complete markets, actuarially fair life insurance/annuity is available, and inve…