Individual Annuity Demand Under Aggregate Mortality Risk
AbstractAggregate mortality risk-the risk that the mortality trend in a population changes in a nondeterministic way-and its implications for corporate decisions has recently been the subject of lively scientific discussion. We show that aggregate mortality risk is also a key determinant for individual annuitization decisions. Aggregate mortality risk appears to be a risk very difficult to transfer for individuals. Whether its existence leads to a higher or lower annuity demand depends on objective factors (e.g., insurers' vulnerability to aggregate mortality changes). Subjective factors (i.e., individuals' preferences) determine only the intensity of the annuity demand reaction to aggregate mortality risk. Our results are of significant importance not only for financial planning approaches of individual annuity buyers but also for strategic decisions in insurance companies and for solvency regulators. Furthermore, consideration of aggregate mortality risk may alleviate, but also intensify, the annuity puzzle. Copyright (c) The Journal of Risk and Insurance, 2009.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by The American Risk and Insurance Association in its journal Journal of Risk and Insurance.
Volume (Year): 77 (2010)
Issue (Month): 2 ()
Contact details of provider:
Web page: http://www.wiley.com/bw/journal.asp?ref=0022-4367&site=1
More information through EDIRC
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Katja Hanewald & John Piggott & Michael Sherris, 2011.
"Individual Post-Retirement Longevity Risk Management Under Systematic Mortality Risk,"
201113, ARC Centre of Excellence in Population Ageing Research (CEPAR), Australian School of Business, University of New South Wales.
- Hanewald, Katja & Piggott, John & Sherris, Michael, 2013. "Individual post-retirement longevity risk management under systematic mortality risk," Insurance: Mathematics and Economics, Elsevier, vol. 52(1), pages 87-97.
- Thomas Post, 2009. "Individual Welfare Gains from Deferred Life-Annuities under Stochastic Lee-Carter Mortality," SFB 649 Discussion Papers SFB649DP2009-022, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
- d'Albis, Hippolyte & Etner, Johanna, 2013.
"Illiquid Life Annuities,"
50751, University Library of Munich, Germany.
- Thomas Post & Katja Hanewald, 2011.
"Longevity Risk, Subjective Survival Expectations, and Individual Saving Behavior,"
201111, ARC Centre of Excellence in Population Ageing Research (CEPAR), Australian School of Business, University of New South Wales.
- Post, Thomas & Hanewald, Katja, 2013. "Longevity risk, subjective survival expectations, and individual saving behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 86(C), pages 200-220.
- Huaxiong Huang & Moshe A. Milevsky & Thomas S. Salisbury, 2012. "Valuation and hedging of the ruin-contingent life annuity (RCLA)," Papers 1205.3686, arXiv.org.
- Thomas Post & Katja Hanewald, 2010. "Stochastic Mortality, Subjective Survival Expectations, and Individual Saving Behavior," SFB 649 Discussion Papers SFB649DP2010-040, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.