Home equity release for long term care financing: an improved market structure and pricing approach

Home equity release products have been promoted as a potential solution to residential long term care costs for the elderly. Unexpectedly low utilization of home equity release loans has prompted efforts to better model and price the No-Negative-Equity-Guarantee (NNEG) built into the contracts, but loan rates are still widely perceived by homeowners as being unattractive.. We propose the introduction of a new adjustable rate loan based on a regional house price index, with the NNEG being borne by a specially created intermediary. The proposed approach allows us to directly address and separately price the basis risk between individual house price returns and index returns. Additionally, it offers the opportunity to create securities based on residential real estate that would be attractive to a wider class of investors. The alternative risk-sharing mechanism creates a more transparent and simple pricing structure for the loans. We then use house sales data to demonstrate the approach. We find in our sample that it would be possible to make higher loans than seen in previous literature using standard roll-up contracts. In the most favourable scenario for our simulations, the maximum loan is 89 per cent of the appraised home value if the loan is advanced as a lump sum and 95 per cent if the loan is advanced in instalments

Assessing Alternative Financing Methods for the Canadian Health Care System in View of Population Aging

The cost of the Canadian health care system is approximately 10% of Gross Domestic Product (GDP). Survey-evidence suggests that Canadians do not wish to have additional funds spent on health care but believe that the system should be able to deliver better quality care. Due to low fertility rates and increasing life expectancy, the Canadian population is aging. Over the next 25 years, the dependency ratio will increase, primarily due to the aging of the “baby boom generation” 2. This will place twofold cost pressures on governments responsible for maintaining the health care system: 1) As a consequence of increased life expectancy, on average, Canadians will have a longer period of health care consumption. Although age-specific cost may not increase, with an aging population aggregate annual health care expenditures are expected to increase. 2) The dependency ratio is a proxy for the ability of the population to support itself. The increasing dependency rate may result in a slowdown in GDP growth, given constant technology. In Section I, this paper attempts to quantify these factors. A single measure combining cost and quality is developed to demonstrate the magnitude of the challenge. In Section II, this paper examines a number of different approaches to health care financing including user fees and alternative compensation methods for physicians. The paper highlights documented information from Canada and international experience on the implementation issues involved. The paper evaluates the desirability of implementing these approaches in Canada.Alternative physician reimbursement models, Capitation, DALE, Disability Adjusted Life Expectancy, QAHE, Quality-Adjusted Health Expenditures, QAHE Index, SID, Supplier-Induced Demand

Basic Living Expenses for the Canadian Elderly

Our research undertakes to determine the basic living expenses required by Canadian seniors living in different circumstances in terms of age, gender, city of residence, household size, homeowner or renter, means of transportation and health status. The paper develops required expenses for food, shelter, health care, transportation and miscellaneous. The research identifies the typical expenses of seniors in each of these categories. Using 2001 as our base year, we follow the US Elder Standard to build an elderly threshold for Halifax, Montreal, Toronto, Calgary and Vancouver. The research is unique because it is the first Canadian study of absolute basic living expenses tailored to seniors, rather than simply to adults in general. This information is important to seniors, prospective retirees, financial planners, policy makers and actuaries in assessing the minimum level of income required in retirement and the adequacy of savings and income security programs. Our conclusions suggest that individual circumstances, rather than age, are the primary drivers in determining the cost of these basic expenses. Seniors are a diverse group, particularly with respect to health, so it is important that seniors and financial planners do not blindly rely on a fixed replacement ratio or universal level of income when projecting the level of finances needed to retire. This research enables the reader to determine the threshold that is suited to a senior’s general circumstances.Retirement Income Adequacy; Absolute Measure; Elder Standard; Canadian Data

The Canadian Elder Standard - Pricing the Cost of Basic Needs for the Canadian Elderly

We determined the after-tax income required to fi nance basic needs for Canadian elders living with different circumstances in terms of age, gender, city of residence, household size, homeowner or renter status, means of transportation, and health status. Using 2001 as our base year, we priced the typical expenses for food, shelter, medical, transportation, miscellaneous basic living items and home-based long-term care for elders living in fi ve Canadian cities. This is the fi rst Canadian study of basic living expenses tailored to elders instead of adults in general, prepared on an absolute rather than a relative basis. We also accounted for an individual’s unique life circumstances and established the varying effect that they have on the cost of basic expenses, particularly for home care. We found that the maximum Guaranteed Income Supple ment and Old Age Security benefi t did not meet the cost of basic needs for an elder living in poor circumstances.Canadian seniors, poverty measure, economic security, aging-in-place, cost-of-living, absolute measure, home care

ALMA Observations of the Largest Proto-Planetary Disk in the Orion Nebula, 114-426: A CO Silhouette

We present ALMA observations of the largest protoplanetary disk in the Orion Nebula, 114-426. Detectable 345 GHz (856 micron) dust continuum is produced only in the 350 AU central region of the ~1000 AU diameter silhouette seen against the bright H-alpha background in HST images. Assuming optically thin dust emission at 345 GHz, a gas-to-dust ratio of 100, and a grain temperature of 20 K, the disk gas-mass is estimated to be 3.1 +/- 0.6 Jupiter masses. If most solids and ices have have been incorporated into large grains, however, this value is a lower limit. The disk is not detected in dense-gas tracers such as HCO+ J=4-3, HCN J=4-3, or CS =7-6. These results may indicate that the 114-426 disk is evolved and depleted in some light organic compounds found in molecular clouds. The CO J=3-2 line is seen in absorption against the bright 50 to 80 K background of the Orion A molecular cloud over the full spatial extent and a little beyond the dust continuum emission. The CO absorption reaches a depth of 27 K below the background CO emission at VLSR ~6.7 km/s about 0.52 arcseconds (210 AU) northeast and 12 K below the background CO emission at VLSR ~ 9.7 km/s about 0.34 arcseconds (140 AU) southwest of the suspected location of the central star, implying that the embedded star has a mass less than 1 Solar mass .Comment: 20 pages, 4 figure

Protoplanetary Disk Masses in the Young NGC 2024 Cluster

We present the results from a Submillimeter Array survey of the 887 micron continuum emission from the protoplanetary disks around 95 young stars in the young cluster NGC 2024. Emission was detected from 22 infrared sources, with flux densities from ~5 to 330 mJy; upper limits (at 3sigma) for the other 73 sources range from 3 to 24 mJy. For standard assumptions, the corresponding disk masses range from ~0.003 to 0.2Msolar, with upper limits at 0.002--0.01Msolar. The NGC 2024 sample has a slightly more populated tail at the high end of its disk mass distribution compared to other clusters, but without more information on the nature of the sample hosts it remains unclear if this difference is statistically significant or a superficial selection effect. Unlike in the Orion Trapezium, there is no evidence for a disk mass dependence on the (projected) separation from the massive star IRS2b in the NGC 2024 cluster. We suggest that this is due to either the cluster youth or a comparatively weaker photoionizing radiation field.Comment: ApJ, in pres

ALMA Observations of the Orion Proplyds

We present ALMA observations of protoplanetary disks ("proplyds") in the Orion Nebula Cluster. We imaged 5 individual fields at 856um containing 22 HST-identified proplyds and detected 21 of them. Eight of those disks were detected for the first time at submillimeter wavelengths, including the most prominent, well-known proplyd in the entire Orion Nebula, 114-426. Thermal dust emission in excess of any free-free component was measured in all but one of the detected disks, and ranged between 1-163 mJy, with resulting disk masses of 0.3-79 Mjup. An additional 26 stars with no prior evidence of associated disks in HST observations were also imaged within the 5 fields, but only 2 were detected. The disk mass upper limits for the undetected targets, which include OB stars, theta1Ori C and theta1Ori F, range from 0.1-0.6 Mjup. Combining these ALMA data with previous SMA observations, we find a lack of massive (>3 Mjup) disks in the extreme-UV dominated region of Orion, within 0.03 pc of O-star theta1Ori C. At larger separations from theta1Ori C, in the far-UV dominated region, there is a wide range of disk masses, similar to what is found in low-mass star forming regions. Taken together, these results suggest that a rapid dissipation of disk masses likely inhibits potential planet formation in the extreme-UV dominated regions of OB associations, but leaves disks in the far-UV dominated regions relatively unaffected.Comment: ApJ, in pres

Impact of the Choice of Risk Assessment Time Horizons on Defined Benefit Pension Schemes

We examine the impact of asset allocation and contribution rates on the risk of defined benefit (DB) pension schemes, using both a run-off and a shorter 3-year time horizon. Using the 3-year horizon, which is typically preferred by regulators, a high bond allocation reduces the spread of the distribution of surplus. However, this result is reversed when examined on a run-off basis. Furthermore, under both the 3-year horizon and the run-off, the higher bond allocation reduces the median level of surplus. Pressure on the affordability of DB schemes has led to widespread implementation of so-called de-risking strategies, such as moving away from predominantly equity investments to greater bond investments. If the incentives produced by shorter term risk assessments are contributing to this shift, they might be harming the long term financial health of the schemes. Contribution rates have relatively lower impact on the risk