Centro de Documentacion de Fundación MAPFRE - A New defined benefit pension risk measurement methodology

MAP20150027863

A New defined benefit pension risk measurement methodology / Jing Ai, Patrick L. Brockett, Allen F. Jacobson

Sumario: Defined benefit pension plan sponsors have taken on greater risks for sponsoring these plans in the last several years. Due to ever increasing concerns of longevity risk and the weak economic environment, sponsors are eager to understand their pension-related risks to facilitate optimal enterprise decision-making. Borrowing an analytical framework from the life insurance and annuity industry where the amount of risk is framed in terms of the total assets required to remain solvent over a one-year period with a high level of confidence, i.e., the economic capital approach, this paper develops a benchmark risk measure for pension sponsors by obtaining a total asset requirement for sustaining the pension plan. The difference between the total asset requirement and the actual trust assets thus provides a measure of sponsor assets at risk due to plan sponsorship. Two factor-based approaches are proposed for this calculation. The first approach develops a set of pension-specific factors as if the pension plan were a group annuity. The second approach directly simulates the risk drivers of the pension plan and develops a framework for obtaining factors and calculating the pension risk given a desired confidence level. Our approach is very easy to implement and monitor in practice

En: Insurance : mathematics and economics. - Oxford : Elsevier, 1990- = ISSN 0167-6687. - 27/08/2015 Volumen 63 - julio 2015 , p. 40-51

1. Planes de pensiones . 2. Longevidad . 3. Previsión social . 4. Gerencia de riesgos . I. Brockett, Patrick L. . II. Jacobson, Allen F. . III. Title.