A dynamic equivalence principle for systematic longevity risk management

Hamza Hanbali, Michel Denuit, Jan Dhaene, Julien Trufin

Research output: Contribution to journalArticleResearchpeer-review

4 Citations (Scopus)

Abstract

This paper addresses systematic longevity risk in long-term insurance business. We analyze the consequences of working under unknown survival probabilities on the efficiency of the Law of Large Numbers and point out the need for appropriate and feasible risk management techniques. We propose a setting for risk sharing schemes between the insurer and policyholders via a dynamic equivalence principle. We focus on a pure endowment contract and derive conditions for a viable risk sharing scheme which enhances the solvency situation of the insurer while being more favorably priced for the policyholders.

Original languageEnglish
Pages (from-to)158-167
Number of pages10
JournalInsurance: Mathematics and Economics
Volume86
DOIs
Publication statusPublished - May 2019
Externally publishedYes

Keywords

  • (Conditional) Law of large numbers
  • Dynamic equivalence principle
  • Risk sharing
  • Solvency
  • Systematic longevity risk

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