|
|||||
|
|
A comparison of risk transfer strategies for a portfolio of life annuities based on RORAC |
|
| Authors: | Fabio Baione Paolo De Angelis Massimiliano Menzietti Agostino Tripodi |
| Affiliation: | 1. Department of Economics and Management, University of Florence, Florence, Italy;2. Department of Methods and Models for Economics, Territory and Finance, Sapienza University of Rome, Rome, Italy;3. Departments of Economics, Statistics and Finance, Calabria University, Rende (CS), Italy;4. Department of Statistics, Sapienza University of Rome, Rome, Italy |
| Abstract: | This paper aims to compare different reinsurance arrangements in order to reduce the longevity and financial risk originated by a life insurer while managing a portfolio of annuities policies. Linear and nonlinear reinsurance strategies as well as swap like agreements are evaluated via a discrete-time actuarial risk model. Specifically, longevity dynamics are represented by Lee–Carter type models, while interest rate is modeled by Cox–Ingersoll–Ross model. The reinsurance strategies effectiveness is evaluated according to the Return on Risk Adjusted Capital under a ruin probability constrain. |
| Keywords: | Longevity risk reinsurance programs survivor swaps ruin probability return on risk adjusted capital |