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Solvency requirement in a unisex mortality model

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  • An Chen
  • Montserrat Guillen
  • Elena Vigna

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 of the mixed portfolio calculated at issuing time assuming unisex survivorship 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 annuity 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

  • An Chen & Montserrat Guillen & Elena Vigna, 2017. "Solvency requirement in a unisex mortality model," Carlo Alberto Notebooks 504, Collegio Carlo Alberto.
    • Handle: RePEc:cca:wpaper:504
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    References listed on IDEAS

    as
    1. Chen, An & Vigna, Elena, 2017. "A unisex stochastic mortality model to comply with EU Gender Directive," Insurance: Mathematics and Economics, Elsevier, vol. 73(C), pages 124-136.
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    6. Olivieri, Annamaria & Pitacco, Ermanno, 2009. "Stochastic Mortality: The Impact on Target Capital," ASTIN Bulletin, Cambridge University Press, vol. 39(2), pages 541-563, November.
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    9. Vijay Aseervatham & Christoph Lex & Spindler, Martin, 2014. "How do unisex rating regulations affect gender differences in insurance premiums?," MEA discussion paper series 201416, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    SCR; life insurance pricing; unisex tariff; unisex fairness principle; life table; risk margin; Gender Directive; gender discrimination.;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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