Mortality credits within large survivor funds

Michel Denuit (), Peter Hieber and Christian Y. Robert
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Michel Denuit: Université catholique de Louvain, LIDAM/ISBA, Belgium
Peter Hieber: Université catholique de Louvain, LIDAM/ISBA, Belgium

No 2022030, LIDAM Reprints ISBA from Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA)

Abstract: Survivor funds are financial arrangements where participants agree to share the proceeds of a collective investment pool in a predescribed way depending on their survival. This offers investors a way to benefit from mortality credits, boosting financial returns. Following Denuit (2019, ASTIN Bulletin, 49, 591–617), participants are assumed to adopt the conditional mean risk sharing rule introduced in Denuit and Dhaene (2012, Insurance: Mathematics and Economics, 51, 265–270) to assess their respective shares in mortality credits. This paper looks at pools of individuals that are heterogeneous in terms of their survival probability and their contributions. Imposing mild conditions, we show that individual risk can be fully diversified if the size of the group tends to infinity. For large groups, we derive simple, hierarchical approximations of the conditional mean risk sharing rule.

Keywords: Mortality risk pooling; tontine; conditional mean risk sharing (search for similar items in EconPapers)
Pages: 22
Date: 2022-06-15
Note: In: ASTIN Bulletin, 2022, vol. 52(3), p. 813-834
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Persistent link: https://EconPapers.repec.org/RePEc:aiz:louvar:2022030

DOI: 10.1017/asb.2022.13

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