Modelling the fair value of annuities contracts: the impact of interest rate risk and mortality risk

The purpose of this paper is to analyze the problem of the fair valuation of annuities contracts. The market consistent valuation of these products requires a pricing framework which includes the two main sources of risk affecting the value of the annuity, i.e. interest rate risk and mortality risk. As the IASB has not set any specific guidelines as to which models are the most appropriate for these risks, in this note we consider a range of different models calibrated with historical data. We calculate the fair value of the annuity as a portfolio of zero coupon bonds, each with maturity set equal to the date of the annuity payments; the weights in the portfolio are given by the survival probabilities. Moreover, we focus on the additional information provided by stochastic simulations in order to define a suitable risk margin. The nature of the risk margin is one of the main key issues concerning the IASB and Solvency project

“Equity is Student Success:” White Women Leaders Closing the Higher Education Opportunity Gap

This qualitative multi-case study explored the experiences of nine women serving as presidents of community and technical colleges in seven different Midwestern states to understand how they serve students with an increasingly diverse background and ultimately work to close the education opportunity gap. The data collection process consisted of virtual semistructured interviews, reviews of strategic planning documents, and cataloguing posts from the LinkedIn, Twitter, and YouTube social media platforms. Seven themes emerged during the cross-case analysis of the nine narrative case studies including Contribute to the Greater Good, Commit, Cultivate, Advocate, Innovate, Collaborate, and Communicate. The central themes that emerged from the cross-case analysis were interpreted through the lens of the ethics-based leadership model as proposed by Fine (2008) and the inclusive Leadership Framework for Action™ developed by Tyner (2021). The goal of this research was to gain insight into the leadership perspectives held by the participants and how these viewpoints inform behaviors to positively affect the education opportunity gap

The Cheerful Giver :;Altruistic Activity Engagement and Happiness in Older Adult Residents of Long-Term Care

Since the passing of the Older Americans Act in 1965 and the Federal Nursing Home Reform Act in 1987, research has shown that engagement in both social and altruistic activities may be successful interventions for maintaining and improving the well-being of nursing home residents. Research is needed, however, to compare these two types of engagement. The goal of the current study, therefore, is to address this need by answering the following questions: (1) Does engagement in altruistic activities predict change in happiness for older adult nursing home residents? Furthermore, what other factors predict changes in happiness in this population? (2) Compared to the social engagement of traditional recreational activities (i.e., standard unit activities), do altruistic activities, specifically intergenerational altruistic activities, foster more active engagement? Seventy-two older adult nursing home residents participated in this study. Results indicated that engagement in intergenerational altruistic activities did, in fact, predict change in happiness for the individuals who were involved in this project. Furthermore, participants\u27 reported frequency of attendance at regularly scheduled activities, as well as the race/ethnicity with which they identified were both additional predictors of changes in happiness. Secondly, participants spent more time actively engaged in the intergenerational altruistic/treatment activities than they did in the regularly scheduled/baseline activities. These findings suggest that altruistic activities, specifically those that are intergenerational in nature, are a viable option for activities programming at long-term care facilities in the U.

Pricing of guaranteed annuity conversion options.

In this note we introduce a theoretical model for the pricing and valuation of guaranteed annuity conversion options associated with certain deferred annuity pension-type contracts in the UK. The valuation approach is based on the similarity between the payoff structure of the contract and a call option written on a coupon-bearing bond. The model makes use of a one-factor Heath-Jarrow-Morton framework for the term structure of interest rates. Numerical results are investigated and the sensitivity of the price of the option to changes in the key parameters is also analyzed

Approximate method for predicting the permanent set in a beam in vacuo and in water subject to a shock wave

An approximate method to compute the maximum deformation and permanent set of a beam subjected to shock wave laoding in vacuo and in water was investigated. The method equates the maximum kinetic energy of the beam (and water) to the elastic plastic work done by a static uniform load applied to a beam. Results for the water case indicate that the plastic deformation is controlled by the kinetic energy of the water. The simplified approach can result in significant savings in computer time or it can expediently be used as a check of results from a more rigorous approach. The accuracy of the method is demonstrated by various examples of beams with simple support and clamped support boundary conditions

The fair valuation problem of guaranteed annuity options: The stochastic mortality environment case

In this paper, we extend the analysis of the behaviour of pension contracts with guaranteed annuity conversion options (as presented in Ballotta and Haberman [Insurance: Math. Econ. 33 (2003) 87]) to the case in which mortality risk is incorporated via a stochastic model for the evolution over time of the underlying hazard rates. The pricing framework makes also use of a Black–Scholes/Heath–Jarrow–Morton economy in order to obtain an analytical solution to the fair valuation problem of the liabilities implied by these particular pension policies. The solution is not in closed form, and therefore, we resort to Monte Carlo simulation. Numerical results are investigated and the sensitivity of the price of the option to changes in the key parameters from the financial and mortality models is also analyzed

Investment Strategies and Risk Management for Participating Life Insurance Contracts

This paper proposes an asset allocation strategy for the risk management of the broad category of participating life insurance policies. The nature of the liability implied by these contracts allows us to treat them as options written on the reference portfolio backing the policy; consequently, the valuation approach is based on classical contingent claim theory. This leads to the identification of additional safety loadings against the risk of default implied by these contracts, and the setting up of suitable investment strategies aimed at minimizing this risk. The impact on the solvency requirements for the capital of the insurer of the proposed asset allocation strategy is analyzed by means of Monte Carlo techniques. Stress testing is considered as well with respect to the key risk factors of the model, such as the equity volatility and the market interest rate. The numerical analysis shows that, for the specific policy design considered in this paper, a suitable choice of the participation rate combined with the proposed investment strategy minimizes the overall default risk of the insurance company, both in terms of probability of default and expected severi

The IASB Insurance Project for life insurance contracts: Impact on reserving methods and solvency requirements

In this communication, we review the fair value-based accounting framework promoted by the IASB Insurance Project for the case of a life insurance company. In particular, for the case of a simple participating contract with minimum guarantee, we show that the fair valuation process allows for the identification of a suitable safety loading to hedge against default risk; furthermore, we show that, when compared with the “traditional” accounting system based on the construction of mathematical reserves, the fair value approach offers a sounder reporting framework in terms of covering of the liability, implementation costs, volatility of assets and liabilities and solvency capital requirements

Characterization of between-group inequality of longevity in European Union countries

Comparisons of differential survival by country are useful in many domains. In the area of public policy, they help policymakers and analysts assess how much various groups benefit from public programs, such as social security and health care. In financial markets and especially for actuaries, they are important for designing annuities and life insurance products. This paper presents a method for clustering information about differential mortality by country. The approach is then used to group mortality surfaces for European Union (EU) countries. The aim of this paper is to measure between-group inequality in mortality experience in EU countries through a range of mortality indicators. Additionally, the indicators permit the characterization of each group. It is important to take into account characteristics such as sex; therefore, this study differentiates between males and females in order to detect whether their patterns and characterizations are different. It is concluded that there are clear differences in mortality between the east and west of the EU that are more important than the traditional south-north division, with a significant disadvantage for Eastern Europe, and especially for males in Baltic countries. We find that the mortality indicators have evolved in all countries in such a way that the gap between groups has been maintained, both in terms of the differences in mortality levels and variability