Categories
- ACTUARIAL DATA SCIENCE
- AFIR / ERM / RISK
- ASTIN / NON-LIFE
- BANKING / FINANCE
- DIVERSITY & INCLUSION
- EDUCATION
- HEALTH
- IACA / CONSULTING
- LIFE
- PENSIONS
- PROFESSIONALISM
- Thought Leadership
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This study analyzes the longevity risk of insurers in Korea, which is expected to experience the fastest population aging in the world. Based on the Lee-Carter model, we generate 10,000 scenarios for the number of future survivors in the group of the 10,000 policyholders of life annuity. According to the result of simulation study the probability of insurer’s loss for both groups of male policyholders and female policyholders is very low. This result indicates that the longevity risk of insurers is not as great as the insurer’s concern. This study also suggests introduction of the longevity swap as an alternative to manage the longevity risk for the insurer which sells life annuity products. The longevity swap enables insurers to enjoy a stable return while reducing capital burden due to the longevity risk inherent in life annuity. On the other hand, the counterparty of swap deal can expect excess profit in exchange for taking longevity risk.
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