Demographic risk, i.e., the risk that life tables change in a nondeterministic way, is a serious threat to the financial stability of an insurance company having underwritten life insurance and annuity business. The inverse influence of changes in mortality laws on the market value of life...

In comparing an immediate life annuity with a payout-equivalent investment fund payout plan (self-annuitization), research to date has focused mainly on shortfall probabilities of self-annuitization. As an exception, Schmeiser and Post (2005) propose a family strategy where the chances of...

Lack of transparency in securitization transactions contributed significantly to the severe financial crisis of 2007-2009. In this paper, based on a recent idea by Markowitz (2009), we propose an incentive-compatible mechanism for future securitization transactions that will increase...

Motivated by a recent demographic study establishing a link between macroeconomic fluctuations and the mortality index kt in the Lee-Carter model, we develop a dynamic asset-liability model to assess the impact of macroeconomic fluctuations on the solvency of a life insurance company....

In this article, we have examined various approaches to valuing a new type of contract emanating from the area of quot;Alternative Risk Transferquot;, a so-called double-trigger reinsurance contract. A double-trigger contract pays off if a certain condition from the underwriting area is...

This paper compares the shareholder-value-maximising capital structure and pricing policy of insurance groups against that of stand-alone insurers. Groups can utilise intra-group risk diversification by means of capital and risk transfer instruments. We show that using these instruments enables...

The European insurance industry is awaiting the new EU-wide harmonised Solvency II framework. Before its introduction, it is important to find out which incentive effects can arise from it. Practitioners predict a trend towards consolidation in the insurance sector due to recognition of...

The Liikanen Group proposes contingent convertible (CoCo) bonds as a potential mechanism to enhance financial stability in the banking industry. Especially life insurance companies could serve as CoCo bond holders as they are already the largest purchasers of bank bonds in Europe. We develop a...

The Liikanen Group proposes contingent convertible (CoCo) bonds as a potential mechanism to enhance financial stability in the banking industry. Especially life insurance companies could serve as CoCo bond holders as they are already the largest purchasers of bank bonds in Europe. We develop a...

We experimentally analyze consumers' reactions to insurance default risk. Consistent with earlier studies, we find that insurance with default risk is extremely unattractive to most individuals. A considerable fraction of consumers completely refuse to accept any default risk; others ask for...