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Enhanced annuities and the impact of individual underwriting on an insurer's profit situation

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  • Hoermann, Gudrun
  • Ruß, Jochen

Abstract

We analyze the effect of enhanced annuities on an insurer engaging in individual underwriting. We use a frailty model for heterogeneity of the insured population and model individual underwriting by a random variable that positively correlates with the corresponding frailty factor. For a given annuity portfolio, we analyze the effect of the quality of the underwriting on the insurer's profit/loss situation and the impact of adverse selection effects.

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  • Hoermann, Gudrun & Ruß, Jochen, 2008. "Enhanced annuities and the impact of individual underwriting on an insurer's profit situation," Insurance: Mathematics and Economics, Elsevier, vol. 43(1), pages 150-157, August.
    • Handle: RePEc:eee:insuma:v:43:y:2008:i:1:p:150-157
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    Cited by:

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    2. Chen, An & Fuino, Michel & Sehner, Thorsten & Wagner, Joël, 2022. "Valuation of long-term care options embedded in life annuities," Annals of Actuarial Science, Cambridge University Press, vol. 16(1), pages 68-94, March.
    3. Franca Glenzer & Bertrand Achou, 2019. "Annuities, long-term care insurance, and insurer solvency," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 44(2), pages 252-276, April.
    4. 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.
    5. Weinert, Jan-Hendrik & Gründl, Helmut, 2016. "The modern tontine: An innovative instrument for longevity risk management in an aging society," ICIR Working Paper Series 22/16, Goethe University Frankfurt, International Center for Insurance Regulation (ICIR).
    6. Ermanno Pitacco & Daniela Y. Tabakova, 2022. "Special-Rate Life Annuities: Analysis of Portfolio Risk Profiles," Risks, MDPI, vol. 10(3), pages 1-22, March.
    7. Nan Zhu & Daniel Bauer, 2013. "Coherent Pricing of Life Settlements Under Asymmetric Information," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 80(3), pages 827-851, September.

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