IDEAS home Printed from https://ideas.repec.org/a/oup/jeurec/v22y2024i4p1981-2024..html

What’s Wrong with Annuity Markets?

Author

Listed:
  • Stéphane Verani
  • Pei Cheng Yu

Abstract

We show that the supply of U.S. life annuities is constrained by interest rate risk. We identify this effect using annuity prices offered by life insurers from 1989 to 2019 and exogenous variations in contract-level regulatory capital requirements. The cost of interest rate risk management—conditional on the effect of adverse selection—accounts for about half of annuity markups, or 8 percentage points. The contribution of interest rate risk to annuity markups sharply increased after the Global Financial Crisis, suggesting new retirees’ opportunities to transfer their longevity risk are unlikely to improve in a persistently low interest rate environment.

Suggested Citation

  • Stéphane Verani & Pei Cheng Yu, 2024. "What’s Wrong with Annuity Markets?," Journal of the European Economic Association, European Economic Association, vol. 22(4), pages 1981-2024.
    • Handle: RePEc:oup:jeurec:v:22:y:2024:i:4:p:1981-2024.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/jeea/jvae007
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    More about this item

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    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:oup:jeurec:v:22:y:2024:i:4:p:1981-2024.. 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: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/jeea .

    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.