The Research On Pricing Of Housing Reverse Mortgage

With the acceleration of ageing of population, our country is facing serious pension problems. Compared with some western developed countries, China's population aging has high-speed with large base.At the same time, most of the old are not rich. By now, China has riot established the all-round social welfare system for the old; the majority has to depend upon society care and family care, so it is difficult for them to enjoy high-quality life. With the reference of US and UK, it is a feasible way of releasing the housing reverse mortgage products, which can also solve the problems of social and family pension. This paper analyses the advantages of the life insurance companies releasing the housing reverse mortgage products at first, then from the point of life insurance companies, it is discussed the pricing problem.The first part of the paper introduces the definition, characteristics and processes of the housing reverse mortgage, and analyses the potential customers feature in China especially. In this part, the author has made summary of the feasible methods of combination between the housing reverse mortgage products and health-care needs, at the same time, it is proposed the idea of establishing the special contingency fund.The core of housing reverse mortgage products is pricing, the pricing factors involve the economical and policy in many aspects. The interest rate risk, the longevity risk as well as the housing value risk constitute three fundamental risks. The three fundamental risks have great influence on the housing reverse mortgage pricing, so it is necessary to control the three fundamental risks. With the help of Eviews5.1, the author analyses Chinese real estate market and obtains the second hand house value model in Shanghai, which is more precise than the rigid pricing model.Based on the Oliver & John actuarial pricing model, the paper has built the housing reverse mortgage actuarial pricing models under the annuity payment, including the single life and two lives.With regard to the health-care needs of the old, the paper also presents the mixed-payment pricing models. In view of the legacy wishes in China, the life insurance company can release the new kind of housing reverse mortgage products with combination of the traditional life insurance products.In view of its unique characteristics, the last part of the paper gives some recommendations from the company level and the government level. It is suggested that the life insurance companies should be prudent before launching this kind of products, and it is necessary to accumulate the data of the clients, and make enough preparation of risk prediction and control. The government can join this from the point of risk transfer mechanisms, credit system; macroeconomic policies and the legal system.Innovations of the paper include four points:(1) Product attributes:The housing reverse mortgage products which are released by the life insurance companies, are the kind of annuity payment products, and it is different from the commercial banks'. This kind of products is commercial loans, and the most important thing is that the current domestic-related research did not make the difference between this.(2) Potential customers feature:The first chapter analyses the potential customers feature in China, and finish the customer type table. The potential customers are classified by gender, health status, marriage, sources of income, status of children and other factors. And the author has made summary of the feasible methods of combination between the housing reverse mortgage products and health-care needs, at the same time, it is proposed the idea of establishing the special contingency fund.(3) Housing reverse mortgage actuarial pricing model:In the first chapter, it is proposed the concept of special contingency fund, so the paper has built the housing reverse mortgage loan actuarial pricing models under the annuity payment, including the single life and two lives.With regard to the health-care needs of the old, the paper also presents the mixed-payment pricing models. In view of the legacy wishes in China, the life insurance company can release the new kind of housing reverse mortgage loan products with combination of the traditional life insurance products. But it is undeniable that housing reverse mortgage is a new financial concept for most of the people in China. Pricing research in domestic is not in-depth, so there are some urgent problems need to be solved, such as interest rate determination, construction of the housing reverse mortgage products Customer Life table and so on.