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The Longevity Risk Faced By Life Insurance Company In China And Its Coping Strategy Under The Background Of Population Aging

Posted on:2015-05-19Degree:MasterType:Thesis
Country:ChinaCandidate:L LiuFull Text:PDF
GTID:2309330434452556Subject:Insurance
Abstract/Summary:PDF Full Text Request
With the development of science and technology, progress of medical st andards and decline of the birth rate, the average life expectancy of populati on in our country increases gradually so that the aging trend is more and m ore obvious. According to statistics data, the average life expectancy of newb orns in our country increased from71.4in2000to74.83in2010, the popu lation of65-year-olds accounted for the proportion of the total population inc reased from7.3%in2002to9.1%in2011. At the same time, the governme nt, enterprises and individuals are also facing growing longevity risk. Longevit y risk is polymeric which means that the overall population’s survival period is more than expected.It is also a system risk which can’t be distributed by the law of large numbers so that it is difficult to manage effectively. Longe vity risk is mainly reflected in two aspects, first is that the life expectancy o f overall population increased, second is that the life of the elderly can not b e effectively protected due to life increasing and mortality decreasing. Longe vity risk pose a tremendous pressure on the three pillar pension system comp osed by basic pension provided by the government, enterprise annuity and co mmercial pension provided by life insurance companies.As to life insurance companies in our country, the pricing of commercia1pension insurance depends on the mortality table CL (2000-2003), but the Ion gevity risk leads to the inconsistent between actual mortality and mortality rec orded in the table, then it directly reduces the premium income of commercia1annuity, at the same time it has negative effects on three main profit sourc es of life insurancecompanies, which are profits from different mortality, exp enses and rates. So the longevity risk causes tremendous pressure on the pro fitability and solvency of life insurance companies in our country.In order to investigate the longevity risk faced by our life insurance co mpanies under the background of aging and provide effective strategies and s uggestions to deal with the longevity risk, this paper first uses the annuity and average life expectancy model of life insurance actuarial mathematics combi ned with the relevant data from the mortality table and population statistics, t hen it measures the influence of longevity risk on the solvency and profitabi lity of our life insurance companies. Next by analyzing the experience of co ping with longevity risk by life insurance companies in America and Europ e and its enlightenment to our country, this paper puts forward the strategies of dealing with longevity risk by our life insurance companies, including pro duct innovation, risk management and policy design. Last are the relevant po licy advices about managing longevity risk by our insurance companies.This article is composed by introduction and four chapters, among which the second and the fourth chapter are more important, following, are the basi c structure and ideas:The introduction states the purpose and significance of this research, inc luding its main research contents, methods, literature review and innovation an d deficiency of this article.The first chapter is the longevity risk under the background of populati on aging, first it describes the definition and present situation of population aging in our country, then it analyses the connotation of longevity risk unde r the background of aging and its influence on China, next it introduces the current situation of longevity risk faced by our country, which displays in tw o aspects, one is the extension of life expectancy, the other is that the life o f elder can not be effectively guaranteed.The second chapter is very important; it mainly studies the influence of1ongevity risk on insurance companies in our country, which is mainly reflecte d in two aspects of solvency and profitability. This chapter mainly adopts the method of quantitative analysis, together with qualitative analysis. As the exis ting mortality table CL (2000-2003) can not reflect the trend of decline of mo rtality, so this chapter uses population statistics in the statistical review to adju st it. Based on the data from the adjusted life table, this chapter first calculat es the decreased amount of premium income of life insurance companies du e to the longevity risk, then it analyses the influence of longevity risk on pro fits from the differences of mortality according to describing the structure. Next it uses the average life expectancy model in life insurance actuarial m athematics to calculate rounded life expectancy at different ages before and a fter adjustment of mortality table.Last it analyses the influence of longevity ri sk on profits from the differences of expenses and rates.In conclusion, the i nfluence of longevity risk on life insurance companies’solvency and profitabi lity mainly reflected on the premium income of annuities and profits from t he differences of mortality, expenses and rates.The third chapter mainly analyses the foreign experience of managing Ion gevity risk and its enlightenment to our country, including variable annuity of America and longevity bonds in European. It first describes their definitions, features, operation mechanism, then discusses their development process in th e country, last analyses their successful experiences and the inspirations to ou r country.The fourth chapter is also important, based on the previous three chapter s, this chapter discusses the strategies of our life insurance companies abou t dealing with longevity risk, which are mainly reflected in three aspects, incl uding design of innovative annuity products, use of tools of risk managemen t, design of policies, it also puts forward a new idea, which is the constructio n of communities for elder dominated by insurance companies. Last it propo ses relevant policy suggestions. A type of innovative annuity insurance produc t is variable annuity, which is introduced from four aspects, including the cl assification, advantages, operation mechanism and that it can reduce the advers e impact of longevity risk, then we introduced the advanced-life delay annui ty; we mainly analyze three tools of risk management including reinsuranc e, longevity securities and Investment on life and annuity insurance to hedg e the longevity risk, Among which we focus on the analysis of the longevit y securities and investment on life and annuity insurance to hedge the longevi ty risk; the design of policy is based on the second chapter, it mainly elabora ted that the life insurance companies can reduce the negative effects oflonge vity risk by increasing the insurance premium and reducing the insurance am ount, then it introduce that the insurance companies can manage the longevit y risk by constructing the elder community.In this paper, the innovation mainly manifests in three aspects, first, the s ubject is new, the paper about the impacts of longevity risk on life insuran ce companies and managing longevity risk is few in our country, Based o n analyzing the negative effects of the longevity risk on our life insurance c ompanies, this article systematically puts forward three strategies about mana ging longevity risk from the perspective of life insurance companies, which are product innovation, risk management and policy design; Second, this articl e draws on the methods against longevity risk of foreign insurance companie s and analyses its successful experience and the enlightenment to our country systematically; Third, this article has some new ideas, including that the life insurance companies of our country can cope with longevity risk by develop ing innovative annuity products and designing policies, the former includes v ariable annuity and advanced-life delay annuity, the latter consists of adjustin g insurance premium, amount and way of pension payment.
Keywords/Search Tags:population aging, longevity risk, mortality, solvency, profitability, annuity, longevity securities
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