Enhanced annuities and the impact of individual underwriting on an insurer’s profit situation |
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| Authors: | Gudrun Hoermann Jochen Ruß |
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| Institution: | aUniversity of St. Gallen, Institute of Insurance Economics, Kirchlistrasse 2, 9010 St. Gallen, Switzerland;bInstitute for Financial and Actuarial Science, Helmholtzstrasse 22, 89081 Ulm, Germany |
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| Abstract: | We analyze the effect of enhanced annuities on an insurer engaging in individual underwriting. We use a frailty model for heterogeneity of the insured population and model individual underwriting by a random variable that positively correlates with the corresponding frailty factor. For a given annuity portfolio, we analyze the effect of the quality of the underwriting on the insurer’s profit/loss situation and the impact of adverse selection effects. |
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| Keywords: | D14 D91 G11 G22 |
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