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Longevity-contingent deferred life annuities*

  • M. DENUIT (a1), S. HABERMAN (a2) and A. E. RENSHAW (a2)

Abstract

Considering the substantial systematic longevity risk threatening annuity providers’ solvency, indexing benefits on actual mortality improvements appears to be an efficient risk management tool, as discussed in Denuit et al. (2011) and Richter and Weber (2011). Whereas these papers consider indexing annuity payments, the present work suggests that the length of the deferment period could also be subject to revision, providing longevity-contingent deferred life annuities.

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The authors thank the two Referees and the Editor for their careful reading and for their constructive comments which allowed us to improve the presentation of our results. Michel Denuit gratefully acknowledges the financial support from the UNIL ‘Chaire Pensions et Longévité’ financed by Retraites Populaires, directed by Professor François Dufresne.

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References

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Bravo, J., Real, P., and Silva, C. (2009) Participating life annuities incorporating longevity risk sharing arrangements. Working Paper available from rdpc.uevora.pt.
Denuit, M., Haberman, S., and Renshaw, A. (2010) Comonotonic approximations to quantiles of life annuity conditional expected present values: extensions to general ARIMA models and comparison with the bootstrap. ASTIN Bulletin, 40: 331349.
Denuit, M., Haberman, S., and Renshaw, A. (2011) Longevity-indexed life annuities. North American Actuarial Journal, 15: 97111.
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Richter, A., and Weber, F. (2011) Mortality-indexed annuities: managing longevity risk via product design. North American Actuarial Journal, 15: 212236.
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