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Longevity Risk: To Bear or to Insure?

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Date
2020
Link to item file
https://dx.doi.org/10.2139/ssrn.2926902
Dewey
Economie financière
Sujet
longevity risk; group self-annuitization (GSA); insurance; variable annuity; D14; E21; G22; G23
JEL code
D.D1.D14; E.E2.E21; G.G2.G22; G.G2.G23
Journal issue
Journal of Pension Economics and Finance
Volume
19
Number
3
Publication date
2020
Article pages
409-441
DOI
http://dx.doi.org/10.1017/S1474747219000192
URI
https://basepub.dauphine.fr/handle/123456789/20986
Collections
  • LEDa : Publications
Metadata
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Author
Boon, Ling-Ni
Brière, Marie
Werker, Bas
Type
Article accepté pour publication ou publié
Abstract (EN)
We compare two contracts for managing systematic longevity risk in retirement: a collective arrangement that distributes the risk among participants, and a market-provided annuity contract. We evaluate the contracts’ appeal with respect to the retiree’s welfare, and the viability of the market solution through the financial reward to the annuity provider’s equityholders. We find that individuals find it more attractive to bear longevity risk under a collective arrangement than to insure it with a life insurers’annuity contract subject to insolvency risk (albeit small). Under realistic capital provision hypotheses, the annuity provider is incapable of adequately compensating its equity holders for bearing systematic longevity risk.

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