| Item Type |
Journal paper
|
| Abstract |
Participating life insurance contracts are common products in Europe. Their savings component typically exhibits an interest rate guarantee in combination with a surplus participation mechanism. Together, these two features constitute an embedded option. The purpose of this article is to show how an insurance company can maximize policyholder utility by setting the level of the interest rate guarantee in line with his preferences. We develop a general model of life insurance, taking stochastic interest rates, early default and regular premium payments into account. Furthermore, we assume that equity holders receive risk adequate returns on their initial equity contribution. Our findings show that the optimal level for the interest rate guarantee is far below the maximum value typically set by the supervisory authorities and insurance companies. |
| Authors |
Braun, Alexander; Fischer, Marius & Schmeiser, Hato |
| Journal or Publication Title |
Journal of Risk Finance |
| Language |
English |
| Subjects |
business studies |
| HSG Classification |
contribution to scientific community |
| Refereed |
No |
| Date |
4 December 2019 |
| Publisher |
Emerald Group Publishing Limited |
| Series Name |
Working Papers on Risk Management and Insurance |
| Volume |
20 |
| Number |
5 |
| Page Range |
445-469 |
| ISSN |
1526-5943 |
| Publisher DOI |
https://doi.org/10.1108/JRF-07-2018-0099 |
| Official URL |
https://www.emerald.com/insight/content/doi/10.110... |
| Depositing User |
Prof. Dr. Alexander Braun
|
| Date Deposited |
10 Aug 2015 11:50 |
| Last Modified |
20 Jul 2022 17:25 |
| URI: |
https://www.alexandria.unisg.ch/publications/243054 |
How to Derive Optimal Guarantee Levels in Participating Life Insurance Contracts
