Allocation of benefits in mutual aid and survivor funds

Michel Denuit () and Christian Y. Robert
Additional contact information
Michel Denuit: Université catholique de Louvain, LIDAM/ISBA, Belgium

No 2022029, LIDAM Discussion Papers ISBA from Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA)

Abstract: Consider a group of individuals contributing in advance (ex ante) a fixed amount to a pool constituted over a reference period to mutually protect against the financial consequences of the occurrence of a predefined event such as death, survival or being diagnosed with a critical illness for instance. They agree that the sum of the contributions is shared in arrear (ex post) among those participants having experienced the predefined event. The allocation can be uniform among claiming participants, each one receiving an equal share of total contributions, or participants may be offered the choice to select in advance an expected amount of benefit, corresponding to their desired protection level. As an application, the paper considers mutual aid funds and survivor funds. The proposed systems are fully funded since contributions are paid in advance. The benefits in case the event occurs are therefore random but the volatility of the terminal payouts turns out to be limited when the number of participants gets large enough. Insurance at fair price is recovered at the limit, within infinitely large pools. The link with takaful insurance is discussed, as well as minimum guar- antees to make the system more attractive.

Keywords: Risk pooling; Actuarial fairness; Mutual inheritance; Insurance at fair price; Takaful (search for similar items in EconPapers)
Pages: 32
Date: 2022-09-19
New Economics Papers: this item is included in nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://dial.uclouvain.be/pr/boreal/en/object/bore ... tastream/PDF_01/view (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aiz:louvad:2022029

Access Statistics for this paper

More papers in LIDAM Discussion Papers ISBA from Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA) Voie du Roman Pays 20, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Nadja Peiffer ().