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Solvency Requirement In A Unisex Mortality Model

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  • Chen, An
  • Guillen, Montserrat
  • Vigna, Elena

Abstract

Following the EU Gender Directive, that obliges insurance companies to charge the same premium to policyholders of different genders, we address the issue of calculating solvency capital requirements (SCRs) for pure endowments and annuities issued to mixed portfolios. The main theoretical result is that, if the unisex fairness principle is adopted for the unisex premium, the SCR at issuing time of the mixed portfolio calculated with unisex survival probabilities is greater than the sum of the SCRs of the gender-based subportfolios. Numerical results show that for pure endowments the gap between the two is negligible, but for lifetime annuities the gap can be as high as 3–4%. We also analyze some conservative pricing procedures that deviate from the unisex fairness principle, and find that they lead to SCRs that are lower than the sum of the gender-based SCRs because the policyholders are overcharged at issuing time.

Suggested Citation

  • Chen, An & Guillen, Montserrat & Vigna, Elena, 2018. "Solvency Requirement In A Unisex Mortality Model," ASTIN Bulletin, Cambridge University Press, vol. 48(3), pages 1219-1243, September.
    • Handle: RePEc:cup:astinb:v:48:y:2018:i:03:p:1219-1243_00
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    Cited by:

    1. Catalina Bolancé & Montserrat Guillen, 2021. "Nonparametric Estimation of Extreme Quantiles with an Application to Longevity Risk," Risks, MDPI, vol. 9(4), pages 1-23, April.
    2. Hainaut, Donatien, 2022. "A calendar year mortality model in continuous time," LIDAM Discussion Papers ISBA 2022019, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).
    3. Maria Carannante & Valeria D’amato & Steven Haberman & Massimiliano Menzietti, 2024. "Frailty-based mortality models and reserving for longevity risk," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 49(2), pages 320-339, April.
    4. Jose M. Pavía & Josep Lledó, 2022. "Estimation of the combined effects of ageing and seasonality on mortality risk: An application to Spain," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 185(2), pages 471-497, April.

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