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The Secondary Market for Life Insurance in the United Kingdom, Germany, and the United States: Comparison and Overview

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  • Nadine Gatzert

Abstract

In this article, we identify key characteristics and implications of the secondary market for life insurance. We examine the oldest secondary market, which is the market in the United Kingdom, the relatively young market in Germany, and the controversial U.S. market. We summarize the available data to describe the current market situation and market potential, which strongly depend on developments in the primary markets and capital markets, as well as on regulatory and legal aspects. Next, we discuss benefits and risks associated with a secondary market, which depend on each market's unique features. The three markets considered in this article are fundamentally different, and the comparative assessment is intended to offer insight into their functioning and key factors.

Suggested Citation

  • Nadine Gatzert, 2010. "The Secondary Market for Life Insurance in the United Kingdom, Germany, and the United States: Comparison and Overview," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 13(2), pages 279-301, September.
    • Handle: RePEc:bla:rmgtin:v:13:y:2010:i:2:p:279-301
    DOI: j.1540-6296.2010.01187.x
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    File URL: https://doi.org/10.1111/j.1540-6296.2010.01187.x
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    References listed on IDEAS

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    1. Grosen, Anders & Lochte Jorgensen, Peter, 2000. "Fair valuation of life insurance liabilities: The impact of interest rate guarantees, surrender options, and bonus policies," Insurance: Mathematics and Economics, Elsevier, vol. 26(1), pages 37-57, February.
    2. Jay Bhattacharya & Dana Goldman & Neeraj Sood, 2004. "Price Regulation in Secondary Insurance Markets," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 71(4), pages 643-675, December.
    3. Nadine Gatzert & Gudrun Hoermann & Hato Schmeiser, 2009. "The Impact of the Secondary Market on Life Insurers’ Surrender Profits," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(4), pages 887-908, December.
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    1. Alexander Braun & Sarah Affolter & Hato Schmeiser, 2016. "Life Settlement Funds: Current Valuation Practices and Areas for Improvement," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 19(2), pages 173-195, September.
    2. Hong, Jimin & Seog, S. Hun, 2018. "Life insurance settlement and the monopolistic insurance market," Insurance: Mathematics and Economics, Elsevier, vol. 81(C), pages 36-50.
    3. Christian Hilpert & Jing Li & Alexander Szimayer, 2014. "The Effect of Secondary Markets on Equity-Linked Life Insurance With Surrender Guarantees," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 81(4), pages 943-968, December.
    4. Cheng, Chunli & Hilpert, Christian & Miri Lavasani, Aidin & Schaefer, Mick, 2023. "Surrender contagion in life insurance," European Journal of Operational Research, Elsevier, vol. 305(3), pages 1465-1479.
    5. Fang, Hanming & Wu, Zenan, 2020. "Life insurance and life settlement markets with overconfident policyholders," Journal of Economic Theory, Elsevier, vol. 189(C).
    6. Kung, Ko-Lun & Hsieh, Ming-Hua & Peng, Jin-Lung & Tsai, Chenghsien Jason & Wang, Jennifer L., 2021. "Explaining the risk premiums of life settlements," Pacific-Basin Finance Journal, Elsevier, vol. 68(C).
    7. Joanna Dębicka & Stanisław Heilpern, 2020. "The optimization of insurance contracts on the viatical market," Operations Research and Decisions, Wroclaw University of Science and Technology, Faculty of Management, vol. 30(2), pages 5-27.
    8. Sutcliffe, Charles, 2015. "Trading death: The implications of annuity replication for the annuity puzzle, arbitrage, speculation and portfolios," International Review of Financial Analysis, Elsevier, vol. 38(C), pages 163-174.
    9. Nolte, Sven & Schneider, Judith C., 2017. "Don’t lapse into temptation: a behavioral explanation for policy surrender," Journal of Banking & Finance, Elsevier, vol. 79(C), pages 12-27.
    10. Oytun Haçarız & Torsten Kleinow & Angus S. Macdonald & Pradip Tapadar & R. Guy Thomas, 2020. "Will genetic test results be monetized in life insurance?," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 23(4), pages 379-399, December.
    11. Joanna Dȩbicka & Beata Zmyślona, 2019. "Modelling of lung cancer survival data for critical illness insurances," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 28(4), pages 723-747, December.
    12. Marcos Escobar & Mikhail Krayzler & Franz Ramsauer & David Saunders & Rudi Zagst, 2016. "Incorporation of Stochastic Policyholder Behavior in Analytical Pricing of GMABs and GMDBs," Risks, MDPI, vol. 4(4), pages 1-36, November.
    13. Jorge Andrés-Sánchez & Laura González-Vila Puchades & Mario Arias-Oliva, 2023. "Factors influencing policyholders' acceptance of life settlements: a technology acceptance model," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 48(4), pages 941-967, October.

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