Managing longevity and disability risks in life annuities with long term care
AbstractThe aim of the paper is twofold. Firstly, it develops a model for risk assessment in a portfolio of life annuities with long term care benefits. These products are usually represented by a Markovian Multi-State model and are affected by both longevity and disability risks. Here, a stochastic projection model is proposed in order to represent the future evolution of mortality and disability transition intensities. Data from the Italian National Institute of Social Security (INPS) and from Human Mortality Database (HMD) are used to estimate the model parameters. Secondly, it investigates the solvency in a portfolio of enhanced pensions. To this aim a risk model based on the portfolio risk reserve is proposed and different rules to calculate solvency capital requirements for life underwriting risk are examined. Such rules are then compared with the standard formula proposed by the Solvency II project.
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Bibliographic InfoArticle provided by Elsevier in its journal Insurance: Mathematics and Economics.
Volume (Year): 50 (2012)
Issue (Month): 3 ()
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Web page: http://www.elsevier.com/locate/inca/505554
Markovian multi-state model; Longevity risk; Disability risk; Solvency II; Internal models;
Find related papers by JEL classification:
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies
- J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
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