Department of Economics and Business Economics

On the management of life insurance company risk by strategic choice of product mix, investment strategy and surplus appropriation schemes

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

  • Alexander Bohnert, Friedrich-Alexander-University Erlangen-Nuremberg, Germany
  • Nadine Gatzert, Friedrich-Alexander-University Erlangen-Nuremberg, Germany
  • Peter Løchte Jørgensen
The aim of this paper is to analyze the impact of management’s strategic choice of asset and liability composition in life insurance on shortfall risk and the shareholders’ fair risk charge. In contrast to previous work, we focus on the effectiveness of management decisions regarding the product mix and the riskiness of the asset side under different surplus appropriation schemes. We propose a model setting that comprises temporary life annuities and endowment insurance contracts. Our numerical results show that the effectiveness of management decisions in regard to risk reduction strongly depends on the surplus appropriation scheme offered to the customer and their impact on guaranteed benefit payments, which thus presents an important control variable for the insurer.
Original languageEnglish
JournalInsurance: Mathematics and Economics
Volume60
Pages (from-to)83-97
Number of pages15
ISSN0167-6687
DOIs
Publication statusPublished - Jan 2015

Bibliographical note

Campus adgang til artiklen / Campus access to the article

    Research areas

  • Participating life insurance, Surplus distribution, Risk-neutral valuation, Fair risk charge, Management mechanisms

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