Longevity and Annuities: An Introduction

Longevity and Annuities: an Introduction

For decades the debate on pensions has focused on the “accumulation phase” of the life-cycle. Many specific research topics have been explored as this literature has developed. However, they were all in one way or another concerned by the adequacy of saving. In other words, the main focus of the existing literature has been on the question of setting enough resources aside to keep the flow of c...

Entropy, Longevity and the Cost of Annuities

Assessing Investment and Longevity Risks within Immediate Annuities

Life annuities provide a guaranteed income for the remainder of the recipient’s lifetime, and therefore, annuitization presents an important option when choosing an adequate investment strategy for the retirement ages. While there are numerous research articles studying annuities from a pensioner’s point of view, thus far there have been few contributions considering annuities from the provider...

Mortality-Indexed Annuities Managing Longevity Risk via Product Design

Longevity risk has become a major challenge for governments, individuals, and annuity providers in most countries, and especially its aggregate form, i.e. the risk of unsystematic changes to general mortality patterns, bears a large potential for accumulative losses for insurers. As obvious risk management tools such as (re)insurance or hedging are less suited to manage an annuity provider’s ex...

The Implied Longevity Yield: A Note on Developing an Index for Life Annuities

The Implied Longevity Yield: A Note on Developing an Index for Life Annuities We develop an index for tracking the dynamic behavior of life (pension) annuity payouts over time, based on the concept of self-annuitization. Our implied longevity yield (ILY) value is de…ned equal to the internal rate of return (IRR) over a …xed deferral period that an individual would have to earn on their investab...