The Research On Consumer Balancing Mode Of Aggregate Longevity Risk

Longevity risk can be divided into individual longevity risk and aggregate longevity risk according to undertakes. Individual longevity risk can be solved by law of large number, while aggregate longevity risk belongs to systematic risk, which cannot be solved by law of large numbers, the only way to this is to find the subject that can pay for this. This paper put forward the pension payment mode in which the aggregate longevity risk is borne by the consumers, and the individual longevity risk is borne by the annuity pool. The main purpose of this paper is to provide a new train of thought to solve longevity risk for the government, company and life insurance companies in China.The payment form of pension under the consumer balancing mode of aggregate longevity risk can provide the participants with cash flow for pension reserve which is similar to ordinary pension annuity, but the originator should not face for systemic longevity risk. This paper measure the value of consumer balancing mode of aggregate longevity risk from these angles:the first one is on the basis of predecessors’research results and the "rule of actuarial fair", this paper improved the derivation process to deduce the payment recursive model of consumer sharing mode of aggregate longevity risk; and then select stochastic dynamic Compertz-Makeham mortality trend extrapolation model and population mortality data of Taiwan in China to predict the change trend of mortality, by the way of Monte Carlo Simulation to measure the distribution of the amount of the pension of the consumer balancing mode of aggregate longevity risk each year according to the change trend of mortality and the payment recursive model, then analysis the reason to this; At last, from the perspective of adverse selection risk, based on general form of the payment recursive model of the consumer balancing mode of aggregate longevity risk and the principle of Certainty Equivalent Method, and through the first order partial derivative of the investment to the survival rate based on the subjective intention, this paper proved the assumption that compared with the ordinary pension, the adverse selection of consumer balancing mode of aggregate longevity risk is smaller, which is one of the advantages of the consumer balancing mode of aggregate longevity risk.