Effectivity in hedging longevity risk: A life insurance scheme of a child plan

  • Lu Xia Lu Xia

In this article, we discuss a life insurance scheme-Child Plan. We use the Lee-Carter and the CBD Models to forecast mortality data of US and UK in order to quantify the Plans. We compare the Child Plan with a Single Life Insurance Plan, and find that the Child Plan has a lower price (net premium) and is less sensitive to mortality risk. So, we draw a conclusion that the Child Plan has an inner hedging system owing to a joint death probability design. We also find that additional benefit conditions-income benefit and both parents insured will increase the price of the Child Plan and cause a higher risk to the insurer. And the older the insurers are, the higher the price and the degree of sensitivity to mortality risks are.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

MORE ABOUT NETSPAR


Mission en strategy           •           Network           •           Organisation           •          Magazine
Board Brief            •            Actionplan 2023-2027           •           Researchagenda

ABOUT NETSPAR

Our partners

B20180327_logo_PGB-Pensioendiensten_grijswaarden
B20160708_aegon
B20160708_maastricht university
B20160708_B20160615_Stichting-van-de-Arbeid-logo
B20160708_radboud
View all partners