The uncertainty regarding financial returns and the life expectancy, joint to the reduced social security benefits, increasingly expose individuals to the risk of outliving their post-retirement assets. However, the demand for longevity guarantees remains low, due to high costs. The providers, on their side, may be reluctant to offer non-adjustable longevity guarantees, as the risk is long term and difficult to predict. It is therefore convenient to reconsider the design of longevity guarantees. In particular, a participating structure, providing a link to some longevity experience, could allow a sharing of losses, and possibly profits, resulting in a reduction of the cost of the retained guarantee. The literature review suggests a number of alternatives to define a longevity-linking arrangement, but the topic is not yet completely explored. It is useful, in particular, to have a common framework, under which the various solutions can be interpreted and compared, also with a view to the trade-off between the retained risk and the cost of the guarantee. Developing a general structure describing longevity-linked post-retirement benefits is the main purpose of this paper. Allowing for aggregate longevity risk, we then examine suitable solutions for insurance products.

Linking annuity benefits to the longevity experience: Alternative solutions / Olivieri, A.; Pitacco, E.. - In: ANNALS OF ACTUARIAL SCIENCE (PRINT). - ISSN 1748-4995. - 14:2(2020), pp. 316-337. [10.1017/S1748499519000137]

Linking annuity benefits to the longevity experience: Alternative solutions

Olivieri A.
;
2020-01-01

Abstract

The uncertainty regarding financial returns and the life expectancy, joint to the reduced social security benefits, increasingly expose individuals to the risk of outliving their post-retirement assets. However, the demand for longevity guarantees remains low, due to high costs. The providers, on their side, may be reluctant to offer non-adjustable longevity guarantees, as the risk is long term and difficult to predict. It is therefore convenient to reconsider the design of longevity guarantees. In particular, a participating structure, providing a link to some longevity experience, could allow a sharing of losses, and possibly profits, resulting in a reduction of the cost of the retained guarantee. The literature review suggests a number of alternatives to define a longevity-linking arrangement, but the topic is not yet completely explored. It is useful, in particular, to have a common framework, under which the various solutions can be interpreted and compared, also with a view to the trade-off between the retained risk and the cost of the guarantee. Developing a general structure describing longevity-linked post-retirement benefits is the main purpose of this paper. Allowing for aggregate longevity risk, we then examine suitable solutions for insurance products.
2020
Linking annuity benefits to the longevity experience: Alternative solutions / Olivieri, A.; Pitacco, E.. - In: ANNALS OF ACTUARIAL SCIENCE (PRINT). - ISSN 1748-4995. - 14:2(2020), pp. 316-337. [10.1017/S1748499519000137]
File in questo prodotto:
File Dimensione Formato  
linking_annuity_benefits_to_the_longevity_experience_alternative_solutions.pdf

non disponibili

Descrizione: Articolo principale
Tipologia: Versione (PDF) editoriale
Licenza: NON PUBBLICO - Accesso privato/ristretto
Dimensione 623.37 kB
Formato Adobe PDF
623.37 kB Adobe PDF   Visualizza/Apri   Richiedi una copia
OlivieriPitacco2019 - LongevityLinking - AAS final.pdf

accesso aperto

Descrizione: Articolo principale - versione accettata
Tipologia: Documento in Post-print
Licenza: Creative commons
Dimensione 277.95 kB
Formato Adobe PDF
277.95 kB Adobe PDF Visualizza/Apri

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11381/2881875
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 2
  • ???jsp.display-item.citation.isi??? 4
social impact