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Longevity risk, cost of capital and hedging for life insurers under Solvency II

Recurso electrónico / electronic resource
MARC record
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1001 ‎$0‎MAPA20130014067‎$a‎Meyricke, Ramona
24510‎$a‎Longevity risk, cost of capital and hedging for life insurers under Solvency II‎$c‎Ramona Meyricke, Michael Sherris
520  ‎$a‎The cost of capital is an important factor determining the premiums charged by life insurers issuing life annuities. This capital cost can be reduced by hedging longevity risk with longevity swaps, a form of reinsurance. We assess the costs of longevity risk management using indemnity based longevity swaps compared to costs of holding capital under Solvency II. We show that, using a reasonable market price of longevity risk, the market cost of hedging longevity risk for earlier ages is lower than the cost of capital required under Solvency II. Longevity swaps covering higher ages, around 90 and above, have higher market hedging costs than the saving in the cost of regulatory capital. The Solvency II capital regulations for longevity risk generates an incentive for life insurers to hold longevity tail risk on their own balance sheets, rather than transferring this to the reinsurance or the capital markets. This aspect of the Solvency II capital requirements is not well understood and raises important policy issues for the management of longevity risk.
650 4‎$0‎MAPA20080555016‎$a‎Longevidad
650 4‎$0‎MAPA20080564254‎$a‎Solvencia II
650 4‎$0‎MAPA20080539863‎$a‎Swaps
650 4‎$0‎MAPA20080563790‎$a‎Predicciones
650 4‎$0‎MAPA20080602437‎$a‎Matemática del seguro
650 4‎$0‎MAPA20080570590‎$a‎Seguro de vida
650 4‎$0‎MAPA20080575281‎$a‎Coste del riesgo
7001 ‎$0‎MAPA20080179083‎$a‎Sherris, Michael
7730 ‎$w‎MAP20077100574‎$t‎Insurance : mathematics and economics‎$d‎Oxford : Elsevier, 1990-‎$x‎0167-6687‎$g‎03/03/2014 Volumen 55 Número 1 - marzo 2014 , p. 147-155