IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Stochastic Mortality, Macroeconomic Risks and Life Insurer Solvency

  • Katja Hanewald

    ()

    (Australian School of Business, School of Actuarial Studies, University of New South Wales, Sydney NSW 2052, Australia.)

  • Thomas Post

    ()

    (School of Business and Economics, Department of Finance, Maastricht University, Tongersestraat 53, 6211 LM Maastricht, The Netherlands.)

  • Helmut Gr�ndl

    ()

    (Faculty of Economics and Business Administration, Chair of Insurance and Regulation, International Center for Insurance Regulation, Goethe-Universit&aauml;t Frankfurt am Main, Gr�neburgplatz 1, 60323 Frankfurt am Main, Germany.)

Motivated by a recent demographic study establishing a link between macroeconomic fluctuations and the mortality index kt in the Lee–Carter model, we develop a dynamic asset-liability model to assess the impact of macroeconomic fluctuations on the solvency of a life insurance company. Liabilities in this stochastic simulation framework are driven by a GDP-linked variant of the Lee–Carter mortality model. Furthermore, interest rates and stock prices react to changes in GDP, which itself is modelled as a stochastic process. Our simulation results show that insolvency probabilities are significantly higher when the reaction of mortality rates to changes in GDP is incorporated.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.palgrave-journals.com/gpp/journal/v36/n3/pdf/gpp201114a.pdf
File Function: Link to full text PDF
Download Restriction: Access to full text is restricted to subscribers.

File URL: http://www.palgrave-journals.com/gpp/journal/v36/n3/full/gpp201114a.html
File Function: Link to full text HTML
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 under "Related research" (further below) or search for a different version of it.

Article provided by Palgrave Macmillan in its journal The Geneva Papers.

Volume (Year): 36 (2011)
Issue (Month): 3 (July)
Pages: 458-475

as
in new window

Handle: RePEc:pal:gpprii:v:36:y:2011:i:3:p:458-475
Contact details of provider: Web page: http://www.palgrave-journals.com/

Order Information: Postal: Palgrave Macmillan Journals, Subscription Department, Houndmills, Basingstoke, Hampshire RG21 6XS, UK
Web: http://www.palgrave-journals.com/pal/subscribe/index.html Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Tapia Granados, José A. & Ionides, Edward L., 2008. "The reversal of the relation between economic growth and health progress: Sweden in the 19th and 20th centuries," Journal of Health Economics, Elsevier, vol. 27(3), pages 544-563, May.
  2. Booth, Heather, 2006. "Demographic forecasting: 1980 to 2005 in review," International Journal of Forecasting, Elsevier, vol. 22(3), pages 547-581.
  3. Helmut Gründl & Thomas Post & Roman N. Schulze, 2006. "To Hedge or Not to Hedge: Managing Demographic Risk in Life Insurance Companies," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 73(1), pages 19-41.
  4. Wolfgang H. Reichmuth & Samad Sarferaz, 2008. "The Influence of the Business Cycle on Mortality," SFB 649 Discussion Papers SFB649DP2008-059, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  5. Jennifer L. Wang & H.C. Huang & Sharon S. Yang & Jeffrey T. Tsai, 2010. "An Optimal Product Mix for Hedging Longevity Risk in Life Insurance Companies: The Immunization Theory Approach," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(2), pages 473-497.
  6. Tsai, Jeffrey T. & Wang, Jennifer L. & Tzeng, Larry Y., 2010. "On the optimal product mix in life insurance companies using conditional value at risk," Insurance: Mathematics and Economics, Elsevier, vol. 46(1), pages 235-241, February.
  7. Ulf-G. Gerdtham & Christopher J. Ruhm, 2002. "Deaths Rise in Good Economic Times: Evidence From the OECD," NBER Working Papers 9357, National Bureau of Economic Research, Inc.
  8. José Tapia granados, 2008. "Macroeconomic fluctuations and mortality in postwar Japan," Demography, Springer, vol. 45(2), pages 323-343, May.
  9. Ronald Lee & Timothy Miller, 2001. "Evaluating the performance of the lee-carter method for forecasting mortality," Demography, Springer, vol. 38(4), pages 537-549, November.
  10. repec:dgr:uvatin:20080090 is not listed on IDEAS
  11. Hári, Norbert & De Waegenaere, Anja & Melenberg, Bertrand & Nijman, Theo E., 2008. "Estimating the term structure of mortality," Insurance: Mathematics and Economics, Elsevier, vol. 42(2), pages 492-504, April.
  12. Debón, A. & Montes, F. & Puig, F., 2008. "Modelling and forecasting mortality in Spain," European Journal of Operational Research, Elsevier, vol. 189(3), pages 624-637, September.
  13. Christopher J. Ruhm, 2000. "Are Recessions Good For Your Health?," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 617-650, May.
  14. Bauer Daniel & Weber Frederik, 2008. "Assessing Investment and Longevity Risks within Immediate Annuities," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 3(1), pages 1-24, September.
  15. Neumayer, Eric, 2004. "Recessions lower (some) mortality rates:: evidence from Germany," Social Science & Medicine, Elsevier, vol. 58(6), pages 1037-1047, March.
  16. Heather Booth & Rob Hyndman & Leonie Tickle & Piet de Jong, 2006. "Lee-Carter mortality forecasting: a multi-country comparison of variants and extensions," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 15(9), pages 289-310, October.
  17. Kling, Alexander & Richter, Andreas & Ru[ss], Jochen, 2007. "The interaction of guarantees, surplus distribution, and asset allocation in with-profit life insurance policies," Insurance: Mathematics and Economics, Elsevier, vol. 40(1), pages 164-178, January.
  18. Brouhns, Natacha & Denuit, Michel & Vermunt, Jeroen K., 2002. "A Poisson log-bilinear regression approach to the construction of projected lifetables," Insurance: Mathematics and Economics, Elsevier, vol. 31(3), pages 373-393, December.
  19. Susanne Kruse & Matthias Meitner & Michael Schroder, 2005. "On the pricing of GDP-linked financial products," Applied Financial Economics, Taylor & Francis Journals, vol. 15(16), pages 1125-1133.
  20. Katja Hanewald, 2008. "Beyond the business cycle - factors driving aggregate mortality rates," SFB 649 Discussion Papers SFB649DP2008-031, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  21. Gustavo Ferro, 2009. "One Possible Life Insurance Market Response to Ageing," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 34(1), pages 119-136, January.
  22. Dowd, Kevin & Cairns, Andrew J.G. & Blake, David, 2006. "Mortality-dependent financial risk measures," Insurance: Mathematics and Economics, Elsevier, vol. 38(3), pages 427-440, June.
  23. Renshaw, A.E. & Haberman, S., 2006. "A cohort-based extension to the Lee-Carter model for mortality reduction factors," Insurance: Mathematics and Economics, Elsevier, vol. 38(3), pages 556-570, June.
  24. Hári, Norbert & De Waegenaere, Anja & Melenberg, Bertrand & Nijman, Theo E., 2008. "Longevity risk in portfolios of pension annuities," Insurance: Mathematics and Economics, Elsevier, vol. 42(2), pages 505-519, April.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:pal:gpprii:v:36:y:2011:i:3:p:458-475. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Daniel Foley)

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.