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The shock of COVID‐19 and the shock of rapid vaccine development on the value of senior life settlement contracts

Author

Listed:
  • Carlos E. Ortiz
  • Charles A. Stone
  • Anne Zissu

Abstract

In this paper, we develop a model that can capture how COVID‐19 and the subsequent rapid vaccine development against COVID‐19 impacts the value of pools of senior life settlements. The pandemic unexpectedly boosted the mortality rates of senior citizens who had prior diagnoses of certain health conditions. Our model accounts for the existence and concentration of these COVID‐19 comorbidities in portfolios of senior life settlements. It is the concentration of assets linked to the mortality rates of a group who is at elevated risk to COVID‐19 and who is also the primary beneficiaries of the COVID‐19 vaccine that we examine. We illustrate how the shock of the pandemic increases the value of senior life settlements and how the accelerated development and distribution of COVID‐19 vaccines moderated this increase. Our model is general enough to simulate the impact on other financial contracts that are linked to individual mortality rates. These would include life insurance contracts, annuities, and health insurance policies.

Suggested Citation

  • Carlos E. Ortiz & Charles A. Stone & Anne Zissu, 2023. "The shock of COVID‐19 and the shock of rapid vaccine development on the value of senior life settlement contracts," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 26(3), pages 393-406, October.
    • Handle: RePEc:bla:rmgtin:v:26:y:2023:i:3:p:393-406
    DOI: 10.1111/rmir.12251
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    References listed on IDEAS

    as
    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. Milevsky, Moshe A., 2020. "Calibrating Gompertz in reverse: What is your longevity-risk-adjusted global age?," Insurance: Mathematics and Economics, Elsevier, vol. 92(C), pages 147-161.
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