IDEAS home Printed from https://ideas.repec.org/a/sae/niesru/v237y2016i1pr55-r61.html
   My bibliography  Save this article

Variable Annuities and Aggregate Mortality Risk

Author

Listed:
  • Martin Weale
  • Justin van de Ven

Abstract

This paper explores the extent to which annuitants might be prepared to pay for protection against cohort-specific mortality risk, by comparing traditional indexed annuities with annuities whose payout rates are revised in response to differences between expected and actual mortality rates of the cohort in question. It finds that a man aged 65 with a coefficient of relative risk aversion of two would be prepared to pay 75p per £100 annuitised for protection against aggregate mortality risk while a man with risk aversion of twenty would be prepared to pay £5.75 per £100; studies put the actual cost at £2.70–£7 per £100, suggesting that unless annuitants are very risk averse it is likely that existing products tend to over-insure against cohort mortality risk.

Suggested Citation

  • Martin Weale & Justin van de Ven, 2016. "Variable Annuities and Aggregate Mortality Risk," National Institute Economic Review, National Institute of Economic and Social Research, vol. 237(1), pages 55-61, August.
    • Handle: RePEc:sae:niesru:v:237:y:2016:i:1:p:r55-r61
    as

    Download full text from publisher

    File URL: http://ner.sagepub.com/content/237/1/R55.abstract
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hanbali, Hamza & Denuit, Michel & Dhaene, Jan & Trufin, Julien, 2019. "A dynamic equivalence principle for systematic longevity risk management," Insurance: Mathematics and Economics, Elsevier, vol. 86(C), pages 158-167.

    More about this item

    Keywords

    variable annuity; aggregate mortality risk; risk aversion;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:niesru:v:237:y:2016:i:1:p:r55-r61. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: https://edirc.repec.org/data/niesruk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.