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Traditional life insurance policies offer no equity investment opportunities for the premium paid, and suffer from low returns over the long insurance terms. Modern equity-linked insurance policies offer equity investment opportunities exposed to equity market risk. To combine the low-risk of...
Persistent link: https://www.econbiz.de/10012891148
Complex insurance risks typically have multiple exposures. Options on multiple underliers with a short maturity are employed to hedge this exposure. Hedges are illustrated for GMWBVA accounts invested in the nine sector ETF's of the US economy. The underliers are simulated risk neutrally by...
Persistent link: https://www.econbiz.de/10012971343
This paper proposes an innovative retirement product with a focus on longevity risk sharing, a contract we refer to as tail index-linked annuity (TILA). Specifically, the proposed TILA pays out variable annual payments, which will be equal to a regular nominal amount when a reference survival...
Persistent link: https://www.econbiz.de/10012826839
I study dynamic hedging for variable annuities under basis risk. Basis risk, which arises from the imperfect correlation between the underlying fund and the proxy asset used for hedging, has a highly negative impact on the hedging performance. I investigate whether the choice of a suitable...
Persistent link: https://www.econbiz.de/10012860194
Solvency appraising is analyzed by means of an appropriate deductive methodology, pointing out the connection to the time dynamic of the business. This research line is framed into a combined approach to solvency measuring, full of suggestions from a regulatory perspective. The model is...
Persistent link: https://www.econbiz.de/10013131654
Universal life policies are the most popular insurance contract design in theUnited States. They have either a level death benefit paying a fixed faceamount, or an increasing death benefit, which additionally pays the availablecash value, and both types include the option to switch from one to...
Persistent link: https://www.econbiz.de/10005861348
We study how risk management through hedging impacts firms and competition among firms in the life insurance industry - an industry with over 7 Trillion in assets and over 1,000 private and public firms. We show that firms that are likely to face costly external finance increase hedging after...
Persistent link: https://www.econbiz.de/10012585845
Pooled annuity products, where the participants share systematic and idiosyncratic mortality risks as well as investment returns and risk, provide an attractive and effective alternative to traditional guaranteed life annuity products. While longevity risk sharing in pooled annuities has...
Persistent link: https://www.econbiz.de/10013363078
We summarize recent trends in risk exposure for U.S. life insurers from variable annuities, shadow insurance, securities lending, and derivatives. We discuss how these sources of risk could be amplified and transmitted to the rest of the financial sector and the real economy. More complete and...
Persistent link: https://www.econbiz.de/10012971002
Rather than taking on more risk, US insurers hit hard by the crisis pulled back from risk taking, relative to insurers not hit as hard by the crisis. Capital requirements alone do not explain this risk reduction: insurers hit hard reduced risk within assets with identical regulatory treatment....
Persistent link: https://www.econbiz.de/10012948522