2023 Australasian Actuarial Education and Research Symposium

Himasha Warnakulasooriya

Department of Econometrics and Business Statistics, Monash University, Australia

Optimal systematic longevity risk-sharing designs for annuities: reconciling policyholder's and insurer's perspectives

This is joint work with Brett Inder, Hamza Hanbali, Jackie Li

This paper explores the design of risk-sharing arrangements in flexible annuity products, specifically focusing on systematic longevity risk. The paper derives optimal dynamic risk-sharing rules for the provider and the policyholder. The combination of analytical and numerical results reveals distinct preferred risk-sharing rules between the two parties engaged in the contract. This study's findings provide insights into the development of optimal risk-sharing mechanisms within flexible annuity products, which is of relevance in pension planning. These insights contribute to the broader understanding of how risk-sharing arrangements can be effectively designed to address longevity risk and benefit all parties involved.