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Longevity Risk: To Bear or to Insure?

Boon, Ling-Ni; Brière, Marie; Werker, Bas (2020), Longevity Risk: To Bear or to Insure?, Journal of Pension Economics and Finance, 19, 3, p. 409-441. 10.1017/S1474747219000192

Type
Article accepté pour publication ou publié
External document link
https://dx.doi.org/10.2139/ssrn.2926902
Date
2020
Journal name
Journal of Pension Economics and Finance
Volume
19
Number
3
Pages
409-441
Publication identifier
10.1017/S1474747219000192
Metadata
Show full item record
Author(s)
Boon, Ling-Ni
Brière, Marie
Werker, Bas
Abstract (EN)
We compare two contracts for managing systematic longevity risk in retirement: a collective arrangement that distributes the risk among participants, and a market-provided annuity contract. We evaluate the contracts’ appeal with respect to the retiree’s welfare, and the viability of the market solution through the financial reward to the annuity provider’s equityholders. We find that individuals find it more attractive to bear longevity risk under a collective arrangement than to insure it with a life insurers’annuity contract subject to insolvency risk (albeit small). Under realistic capital provision hypotheses, the annuity provider is incapable of adequately compensating its equity holders for bearing systematic longevity risk.
Subjects / Keywords
longevity risk; group self-annuitization (GSA); insurance; variable annuity; D14; E21; G22; G23
JEL
D14 - Household Saving; Personal Finance
E21 - Consumption; Saving; Wealth
G22 - Insurance; Insurance Companies; Actuarial Studies
G23 - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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    Boon, Ling-Ni; Brière, Marie; Gresse, Carole; Werker, Bas J. M. (2013-06) Communication / Conférence
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    Common risk factors in commodities 
    Chevallier, Julien; Ielpo, Florian; Boon, Ling-Ni (2013) Article accepté pour publication ou publié
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