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Risk-seeking behavior and its implications for the optimal decision making of annuity insurers

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MAP20230012598
Chen, Cuixia
Risk-seeking behavior and its implications for the optimal decision making of annuity insurers / Cuixia Chen, Yijia Lin, Ming Zhou
Sumario: This study investigates risk-seeking and optimal decisions of annuity providers. On the basis of a sample of U.S. life and annuity (L/A) insurers between 1997 and 2016, the results show clear performance-dependent risk attitudes. Specifically, insurers with
returns below aspiration levels take more risks, whereas those with returns above reference levels decrease their risk-seeking, which supports the basic propositions of the cumulative prospect theory (CPT). Given initial evidence of mixed risk preferences in the L/A insurance industry, we derive an annuity insurer's optimal investment and business strategies in a CPT decision-making framework. We show that changing risk preferences considerably affect an annuity provider's decisions. We further illustrate how risk management changes an annuity insurer's optimal strategies. Our results suggest that risk management lowers downside risk and allows a loss-averse decision maker to assume more risk and achieve a higher level of utility
En: North American actuarial journal. - Schaumburg : Society of Actuaries, 1997- = ISSN 1092-0277. - 06/03/2023 Tomo 27 Número 1 - 2023 , 25-46
1. Cálculo actuarial . 2. Renta vitalicia . 3. Gerencia de riesgos . 4. Estrategia empresarial . 5. Toma de decisiones . I. Lin, Yijia . II. Zhou, Ming .