We study the valuation of unit-linked life insurance contracts with surrender guarantees. Instead of solving an optimal stopping problem, we propose a more realistic approach accounting for policyholders’ rationality in exercising their surrender option. The valuation is conducted at the...

This paper includes couples on the demand side and analyses their implications on the problem of adverse selection in the annuity market. First, we examine the pooling equilibrium for individual-life annuities and show that in the presence of couples the rate of return on individuallife...

We analyse contracts which pay out a guaranteed minimum rate of return and a fraction of a positive excess rate, which is specified on the basis of a benchmark portfolio. These contracts are closely related to unit--linked life--insurance/savings plan products and can be considered as...

A deferred annuity typically includes an option-like right for the policyholder. At the end of the deferment period, he may either choose to receive annuity payouts, calculated based on a mortality table agreed to at contract inception, or receive the accumulated capital as a lump sum....

We examine how long-term life insurance contracts can be designed to incorporate uncertain future bequest needs. An individual who buys a life insurance contract early in life is often uncertain about the future financial needs of his or her family, in the event of an untimely death. Ideally,...

Motivated by a recent demographic study establishing a link between macroeconomic fluctuations and the mortality index kt in the Lee-Carter model, we assess the impact of macroeconomic fluctuations on the solvency of a life insurance company. Liabilities in our stochastic simulation framework...

We study the valuation and hedging of unit-linked life insurance contracts in a setting where mortality intensity is governed by a stochastic process. We focus on model risk arising from different specifications for the mortality intensity. To do so we assume that the mortality intensity is...

Empirical evidence that migrants send home more remittances after disasters raises the question of whether remittances can be used to self-insure, substituting for both formal and informal insurance. We investigate this question using a unique data set on the usage patterns of financial services...

Microinsurance is an emerging concept protecting households from the potentially catastrophic expenditures associated with family related shocks. Therefore, this paper presents evidence on the determinants of insurance participation using probit models on household survey data from Sri Lanka,...

In this paper, we test the efficiency of least-squares Monte Carlo method to estimate capital requirements in life insurance. We choose a simplified Gaussian evaluation framework where closed-form formulas are available and allow us to obtain solid benchmarks. Extensive numerical experiments...