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The Effect of Secondary Markets on Equity-Linked Life Insurance With Surrender Guarantees


  • Christian Hilpert
  • Jing Li
  • Alexander Szimayer


type="main" xml:lang="en"> Many equity-linked life insurance products offer the possibility to surrender policies prematurely. Secondary markets for policies with surrender guarantees influence both policyholders and insurers. We show that secondary markets lead to a gap in policy value between insurer and policyholder. Insurers increase premiums to adjust for higher surrender rates of customers and optimized surrender behavior by investors acquiring the policies on secondary markets. Hence, the existence of secondary markets is not necessarily profitable for the primary policyholders. The result depends on the demand for and the supply of the contracts brought to the secondary markets.

Suggested Citation

  • Christian Hilpert & Jing Li & Alexander Szimayer, 2014. "The Effect of Secondary Markets on Equity-Linked Life Insurance With Surrender Guarantees," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 81(4), pages 943-968, December.
  • Handle: RePEc:bla:jrinsu:v:81:y:2014:i:4:p:943-968

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    1. repec:bla:jrinsu:v:84:y:2017:i:2:p:661-690 is not listed on IDEAS
    2. Pavel V. Shevchenko & Xiaolin Luo, 2016. "A unified pricing of variable annuity guarantees under the optimal stochastic control framework," Papers 1605.00339,

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