Mortality risk management under the factor copula framework – with applications to insurance policy pools. (English) Zbl 1466.91263

Hsieh, Ming-Hua; Tsai, Chenghsien Jason; Wang, Jennifer L.

N. Am. Actuar. J. 25, Suppl. 1, S119-S131 (2021).

The paper focuses on the mortality risk source and its impact on the life insurers’ business. This subject is extremely important, since the dependence structure among the uncertainty of future lifetime of each insured determines the aggregate risk of an insurance policy pool. In particular, this study proposes factor copulas to describe the dependence structure among the future lifetimes of numerous insureds. After introducing the main valuation formulas and dependence structures between a life settlement fund and a life insurance pool, the paper illustrates the data, the assumptions behind and the numerical analyses. The core of the study consists in solving for the optimal investment amount in the fund with respect to different risk measures. Numerical illustrations, supported by appropriate robustness checks, show concrete applications of the results presented in the paper.

Reviewer: Emilia Di Lorenzo (Napoli)

MSC:

91G05

Actuarial mathematics

Keywords:

mortality risk; aggregate mortality risk; mortality-linked security

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