On the Market-Consistent Valuation of Participating Life Insurance Heterogeneous Contracts under Longevity Risk
The purpose of this paper is to conduct a market-consistent valuation of life insurance participating liabilities sold to a population of partially heterogeneous customers under the joint impact of biometric and financial risk. In particular, the heterogeneity between groups of policyholders stems f...
| Main Authors: | , , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
MDPI AG
2021-01-01
|
| Series: | Risks |
| Subjects: | |
| Online Access: | https://www.mdpi.com/2227-9091/9/1/20 |
| _version_ | 1797413279321030656 |
|---|---|
| author | Anna Rita Bacinello An Chen Thorsten Sehner Pietro Millossovich |
| author_facet | Anna Rita Bacinello An Chen Thorsten Sehner Pietro Millossovich |
| author_sort | Anna Rita Bacinello |
| collection | DOAJ |
| description | The purpose of this paper is to conduct a market-consistent valuation of life insurance participating liabilities sold to a population of partially heterogeneous customers under the joint impact of biometric and financial risk. In particular, the heterogeneity between groups of policyholders stems from their offered minimum interest rate guarantees and contract maturities. We analyse the effects of these features on the company’s insolvency while embracing the insurer’s goal to achieve the same expected return for different cohorts of policyholders. Within our extensive numerical analyses, we determine the fair participation rates and other key figures, and discuss the implications for the stakeholders, taking account of various degrees of conservativeness of the insurer when pricing the contracts. |
| first_indexed | 2024-03-09T05:14:51Z |
| format | Article |
| id | doaj.art-4ddad9c44de9494e937bab0990e59e9d |
| institution | Directory Open Access Journal |
| issn | 2227-9091 |
| language | English |
| last_indexed | 2024-03-09T05:14:51Z |
| publishDate | 2021-01-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Risks |
| spelling | doaj.art-4ddad9c44de9494e937bab0990e59e9d2023-12-03T12:45:59ZengMDPI AGRisks2227-90912021-01-01912010.3390/risks9010020On the Market-Consistent Valuation of Participating Life Insurance Heterogeneous Contracts under Longevity RiskAnna Rita Bacinello0An Chen1Thorsten Sehner2Pietro Millossovich3Department of Economics, Business, Mathematics and Statistics ‘B. de Finetti’, University of Trieste, Via dell’Università 1, 34100 Trieste, ItalyFaculty of Mathematics and Economics, University of Ulm, Helmholtzstrasse 20, 89069 Ulm, GermanyFaculty of Mathematics and Economics, University of Ulm, Helmholtzstrasse 20, 89069 Ulm, GermanyDepartment of Economics, Business, Mathematics and Statistics ‘B. de Finetti’, University of Trieste, Via dell’Università 1, 34100 Trieste, ItalyThe purpose of this paper is to conduct a market-consistent valuation of life insurance participating liabilities sold to a population of partially heterogeneous customers under the joint impact of biometric and financial risk. In particular, the heterogeneity between groups of policyholders stems from their offered minimum interest rate guarantees and contract maturities. We analyse the effects of these features on the company’s insolvency while embracing the insurer’s goal to achieve the same expected return for different cohorts of policyholders. Within our extensive numerical analyses, we determine the fair participation rates and other key figures, and discuss the implications for the stakeholders, taking account of various degrees of conservativeness of the insurer when pricing the contracts.https://www.mdpi.com/2227-9091/9/1/20participating life insuranceheterogeneous policyholdersmarket-consistent valuationlongevity riskfair contract analysis |
| spellingShingle | Anna Rita Bacinello An Chen Thorsten Sehner Pietro Millossovich On the Market-Consistent Valuation of Participating Life Insurance Heterogeneous Contracts under Longevity Risk Risks participating life insurance heterogeneous policyholders market-consistent valuation longevity risk fair contract analysis |
| title | On the Market-Consistent Valuation of Participating Life Insurance Heterogeneous Contracts under Longevity Risk |
| title_full | On the Market-Consistent Valuation of Participating Life Insurance Heterogeneous Contracts under Longevity Risk |
| title_fullStr | On the Market-Consistent Valuation of Participating Life Insurance Heterogeneous Contracts under Longevity Risk |
| title_full_unstemmed | On the Market-Consistent Valuation of Participating Life Insurance Heterogeneous Contracts under Longevity Risk |
| title_short | On the Market-Consistent Valuation of Participating Life Insurance Heterogeneous Contracts under Longevity Risk |
| title_sort | on the market consistent valuation of participating life insurance heterogeneous contracts under longevity risk |
| topic | participating life insurance heterogeneous policyholders market-consistent valuation longevity risk fair contract analysis |
| url | https://www.mdpi.com/2227-9091/9/1/20 |
| work_keys_str_mv | AT annaritabacinello onthemarketconsistentvaluationofparticipatinglifeinsuranceheterogeneouscontractsunderlongevityrisk AT anchen onthemarketconsistentvaluationofparticipatinglifeinsuranceheterogeneouscontractsunderlongevityrisk AT thorstensehner onthemarketconsistentvaluationofparticipatinglifeinsuranceheterogeneouscontractsunderlongevityrisk AT pietromillossovich onthemarketconsistentvaluationofparticipatinglifeinsuranceheterogeneouscontractsunderlongevityrisk |