Centro de Documentacion de Fundación MAPFRE - Hedging mortality-longevity risks of insurance portfolios for life insurer-annuity provider and financial intermediary

MAP20160003956

Hedging mortality-longevity risks of insurance portfolios for life insurer-annuity provider and financial intermediary / Lin Tzuling, Cary Chi-Liang Tsa

Sumario: In this paper, we propose two risk hedge schemes in which a life insurer (an annuity provider) can transfer mortality (longevity) risk of a portfolio of life (annuity) exposures to a financial intermediary by paying the hedging premium of a mortality-linked security. The optimal units of the mortality-linked security which maximize hedge effectiveness for a life insurer (an annuity provider) can be derived as closed-form formulas under the risk hedge schemes. Numerical illustrations show that the risk hedge schemes can significantly hedge the downside risk of loss due to mortality (longevity) risk for the life insurer (annuity provider) under some stochastic mortality models. Besides, finding an optimal weight of a portfolio of life and annuity business, the financial intermediary can reduce the sensitivity to mortality rates but the model risk; a security loading may be imposed on the hedge premium for a higher probability of gain to compensate the financial intermediary for the inevitable model risk

En: Insurance : mathematics and economics. - Oxford : Elsevier, 1990- = ISSN 0167-6687. - 04/01/2016 Volumen 66 - enero 2016 , p. 44-58

1. Coberturas . 2. Cartera de seguros . 3. Mortalidad . 4. Longevidad . 5. Modelo Lee-Carter . 6. Seguro de vida . 7. Cálculo actuarial . I. Chi-Liang Tsai, Cary . II. Título.