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4363. On the Adverse Selection in longevity risk Transfer
Invited abstract in session TD-63: New Challenges for Risk Management , stream OR in Banking, Finance and Insurance: New Tools for Risk Management.
Tuesday, 14:30-16:00Room: S14 (building: 101)
Authors (first author is the speaker)
| 1. | Valeria D Amato
|
| Economics and Statistics, University of Salerno | |
| 2. | Maria Carannante
|
| University of Salerno | |
| 3. | Massimiliano Menzietti
|
| DISES, University of Salerno | |
| 4. | Steven Haberman
|
| Casa Business School |
Abstract
The literature finds evidences of adverse selection all insurance businesses. Nevertheless, these
analyses remain inconclusive as regards the economic consequences for the insurance industry,
particularly for institutions bearing longevity by transferring the longevity risk exposure. The present research gives a contribution to the assessment of the adverse selection in the context under consideration and evaluate the change in the cost of transferring longevity to capital market, which can be pointed out as a sort safety loading, consisting in an optimal hedge, i.e. “the equilibrium hedge”, since it contains the market inefficiencies due to the adverse selection effects. For estimating. the longevity exposure, the projections are based on a more informative stochastic model which is the frailty-based model proposed by the authors.
Keywords
- Finance and Banking
- Financial Modelling
- Stochastic Models
Status: accepted
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