Department of Economics and Business Economics

Annuitization and aggregate mortality risk

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Annuitization and aggregate mortality risk. / Andersen, Torben M.; Gestsson, Marias H.

In: Journal of Risk and Insurance, Vol. 88, No. 1, 03.2021, p. 79-99.

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

Harvard

Andersen, TM & Gestsson, MH 2021, 'Annuitization and aggregate mortality risk', Journal of Risk and Insurance, vol. 88, no. 1, pp. 79-99. https://doi.org/10.1111/jori.12313

APA

Andersen, T. M., & Gestsson, M. H. (2021). Annuitization and aggregate mortality risk. Journal of Risk and Insurance, 88(1), 79-99. https://doi.org/10.1111/jori.12313

CBE

Andersen TM, Gestsson MH. 2021. Annuitization and aggregate mortality risk. Journal of Risk and Insurance. 88(1):79-99. https://doi.org/10.1111/jori.12313

MLA

Andersen, Torben M. and Marias H. Gestsson. "Annuitization and aggregate mortality risk". Journal of Risk and Insurance. 2021, 88(1). 79-99. https://doi.org/10.1111/jori.12313

Vancouver

Andersen TM, Gestsson MH. Annuitization and aggregate mortality risk. Journal of Risk and Insurance. 2021 Mar;88(1):79-99. https://doi.org/10.1111/jori.12313

Author

Andersen, Torben M. ; Gestsson, Marias H. / Annuitization and aggregate mortality risk. In: Journal of Risk and Insurance. 2021 ; Vol. 88, No. 1. pp. 79-99.

Bibtex

@article{1c3c11d92d1b440399384cb292942f60,
title = "Annuitization and aggregate mortality risk",
abstract = "It is well established that annuities can fully diversify idiosyncratic mortality risks. However, survival rates at the cohort level are changing, raising the question what is the scope of annuities in the presence of aggregate mortality risk? In an overlapping generations setting, we show that risk free annuities exist, but offer a return below the (fair) certainty equivalent return, and agents do not fully annuitize their savings. Higher aggregate mortality risk increases savings and thus the mean level of the capital stock. This lowers the mean rate of return on capital, the survival premium on annuities and the share of individual savings in annuities.",
keywords = "aggregate mortality risk, annuitization, annuity markets, dynamic efficiency, overlapping generations models",
author = "Andersen, {Torben M.} and Gestsson, {Marias H.}",
note = "Funding Information: The constructive comments and suggestions from referees and the editor are gratefully acknowledged. The support from the Danish Research Council is gratefully acknowledged. Publisher Copyright: {\textcopyright} 2020 American Risk and Insurance Association Copyright: Copyright 2021 Elsevier B.V., All rights reserved.",
year = "2021",
month = mar,
doi = "10.1111/jori.12313",
language = "English",
volume = "88",
pages = "79--99",
journal = "Journal of Risk and Insurance",
issn = "0022-4367",
publisher = "Wiley-Blackwell Publishing, Inc.",
number = "1",

}

RIS

TY - JOUR

T1 - Annuitization and aggregate mortality risk

AU - Andersen, Torben M.

AU - Gestsson, Marias H.

N1 - Funding Information: The constructive comments and suggestions from referees and the editor are gratefully acknowledged. The support from the Danish Research Council is gratefully acknowledged. Publisher Copyright: © 2020 American Risk and Insurance Association Copyright: Copyright 2021 Elsevier B.V., All rights reserved.

PY - 2021/3

Y1 - 2021/3

N2 - It is well established that annuities can fully diversify idiosyncratic mortality risks. However, survival rates at the cohort level are changing, raising the question what is the scope of annuities in the presence of aggregate mortality risk? In an overlapping generations setting, we show that risk free annuities exist, but offer a return below the (fair) certainty equivalent return, and agents do not fully annuitize their savings. Higher aggregate mortality risk increases savings and thus the mean level of the capital stock. This lowers the mean rate of return on capital, the survival premium on annuities and the share of individual savings in annuities.

AB - It is well established that annuities can fully diversify idiosyncratic mortality risks. However, survival rates at the cohort level are changing, raising the question what is the scope of annuities in the presence of aggregate mortality risk? In an overlapping generations setting, we show that risk free annuities exist, but offer a return below the (fair) certainty equivalent return, and agents do not fully annuitize their savings. Higher aggregate mortality risk increases savings and thus the mean level of the capital stock. This lowers the mean rate of return on capital, the survival premium on annuities and the share of individual savings in annuities.

KW - aggregate mortality risk

KW - annuitization

KW - annuity markets

KW - dynamic efficiency

KW - overlapping generations models

UR - http://www.scopus.com/inward/record.url?scp=85100793458&partnerID=8YFLogxK

U2 - 10.1111/jori.12313

DO - 10.1111/jori.12313

M3 - Journal article

AN - SCOPUS:85100793458

VL - 88

SP - 79

EP - 99

JO - Journal of Risk and Insurance

JF - Journal of Risk and Insurance

SN - 0022-4367

IS - 1

ER -