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Systematic and Nonsystematic Mortality Risk in Pension Portfolios

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  • Helena Aro

Abstract

We study the effects of nonsystematic and systematic mortality risks on the required initial capital in a pension plan, in the presence of financial risks. We discover that for a pension plan with few members the impact of pooling on the required capital per person is strong, but nonsystematic risk diminishes rapidly as the number of members increases. Systematic mortality risk, on the other hand, is a significant source of risk in a pension portfolio.

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  • Helena Aro, 2014. "Systematic and Nonsystematic Mortality Risk in Pension Portfolios," North American Actuarial Journal, Taylor & Francis Journals, vol. 18(1), pages 59-67.
    • Handle: RePEc:taf:uaajxx:v:18:y:2014:i:1:p:59-67
    DOI: 10.1080/10920277.2013.861340
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    Cited by:

    1. Blake, David & Cairns, Andrew J.G., 2021. "Longevity risk and capital markets: The 2019-20 update," Insurance: Mathematics and Economics, Elsevier, vol. 99(C), pages 395-439.
    2. Platanakis, Emmanouil & Sutcliffe, Charles, 2016. "Pension scheme redesign and wealth redistribution between the members and sponsor: The USS rule change in October 2011," Insurance: Mathematics and Economics, Elsevier, vol. 69(C), pages 14-28.

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