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A feasible natural hedging strategy for insurance companies

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  • Wang, Chou-Wen
  • Huang, Hong-Chih
  • Hong, De-Chuan

Abstract

To offer a means for insurance companies to deal with longevity risk, this article investigates a natural hedging strategy and attempts to find an optimal allocation of insurance products. Unlike prior research, this proposed natural hedging model can account for both the variance and mispricing effects of longevity risk at the same time. In addition, this study employs experience mortality rates, obtained from life insurance companies, rather than population mortality data for life insurance and annuity products.

Suggested Citation

  • Wang, Chou-Wen & Huang, Hong-Chih & Hong, De-Chuan, 2013. "A feasible natural hedging strategy for insurance companies," Insurance: Mathematics and Economics, Elsevier, vol. 52(3), pages 532-541.
    • Handle: RePEc:eee:insuma:v:52:y:2013:i:3:p:532-541
    DOI: 10.1016/j.insmatheco.2013.02.015
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    References listed on IDEAS

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    Cited by:

    1. Li, Jackie & Haberman, Steven, 2015. "On the effectiveness of natural hedging for insurance companies and pension plans," Insurance: Mathematics and Economics, Elsevier, vol. 61(C), pages 286-297.
    2. Jevtić, Petar & Regis, Luca, 2015. "Assessing the solvency of insurance portfolios via a continuous-time cohort model," Insurance: Mathematics and Economics, Elsevier, vol. 61(C), pages 36-47.
    3. Lin, Tzuling & Wang, Chou-Wen & Tsai, Cary Chi-Liang, 2015. "Age-specific copula-AR-GARCH mortality models," Insurance: Mathematics and Economics, Elsevier, vol. 61(C), pages 110-124.
    4. Arkadiusz Filip, 2018. "Natural immunization of an insurance portfolio against longevity risk," Collegium of Economic Analysis Annals, Warsaw School of Economics, Collegium of Economic Analysis, issue 51, pages 63-92.

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