Optimum and Risk-Class Pricing of Annuities
AbstractWhen information on longevity (survival functions) is unknown early in life, individuals have an interest to insure themselves against future ’risk-class’ classification. Accordingly, the First-Best typically involves transfers across states of nature. Competitive equilibrium cannot provide such transfers if insurance firms are unable to precommit their customers. On the other hand, public insurance plans that do not distinguish between ’risk-class’ realizations are also inefficient. It is impossible, a-priori, to rank these alternatives from a welfare point of view.
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Bibliographic InfoPaper provided by The Center for the Study of Rationality, Hebrew University, Jerusalem in its series Discussion Paper Series with number dp327.
Length: 16 pages
Date of creation: Apr 2001
Date of revision:
longevity; survival functions; risk-class; transfers; retirement;
Other versions of this item:
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
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- 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.
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