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Interaction effects between dynamic hybrid products and traditional deferred annuities in the German life insurance market

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  • Nikolaj Moretti
  • Johannes Bartels

Abstract

Dynamic hybrid products emerged in 2007 and are now well established in the German life insurance market. In this article, we study interaction effects between dynamic hybrid products and traditional deferred annuity contracts, that are sold by the same insurance company. The key question we investigate is whether the presence of dynamic hybrid products has a negative effect on the payout of traditional insurance products. We do so by using data drawn from a Monte Carlo simulation that is based on a model presented in this article. These data reveal that dynamic hybrid products reduce the payment to policyholders of traditional deferred annuities via the channel of surplus participation.

Suggested Citation

  • Nikolaj Moretti & Johannes Bartels, 2021. "Interaction effects between dynamic hybrid products and traditional deferred annuities in the German life insurance market," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 35(2), pages 193-224, June.
    • Handle: RePEc:kap:fmktpm:v:35:y:2021:i:2:d:10.1007_s11408-020-00367-z
    DOI: 10.1007/s11408-020-00367-z
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    References listed on IDEAS

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    1. Georges Dionne (ed.), 2013. "Handbook of Insurance," Springer Books, Springer, edition 2, number 978-1-4614-0155-1, December.
    2. Hambardzumyan, Hayk & Korn, Ralf, 2019. "Dynamic hybrid products with guarantees—An optimal portfolio framework," Insurance: Mathematics and Economics, Elsevier, vol. 84(C), pages 54-66.
    3. Alexander Bohnert & Nadine Gatzert, 2014. "Fair Valuation and Risk Assessment of Dynamic Hybrid Products in Life Insurance: A Portfolio Consideration*," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 39(1), pages 148-172, January.
    4. Bohnert, Alexander & Born, Patricia & Gatzert, Nadine, 2014. "Dynamic hybrid products in life insurance: Assessing the policyholders’ viewpoint," Insurance: Mathematics and Economics, Elsevier, vol. 59(C), pages 87-99.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Life insurance; Guaranteed interest rates; Dynamic hybrid; Constant proportion portfolio insurance; Customer value; DTH product; Insurance regulation;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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