The paper describes a model that evaluates the solvency of a port-
folio of assets and liabilities of an insurer subject to longevity risk and financial risks. Liabilities are evaluated at fair-value. Interest-rate risk can affect both assets and liabilities. Longevity risk is described via a continuous-time cohort model. We evaluate the impact of different investment and hedging strategies on the characteristics of the funding ratio of run-off portfolios at different time horizons. Numerical simulations, calibrated to UK historical data, show that systematic longevity risk is particularly important in the long-run and needs to be hedged.
We highlight that portfolio size, investment choices and solvency re-
quirements are deeply interconnected. Natural hedging techniques can
effectively reduce the required solvency buffer when interest-rate risk is perfectly hedged.

Netspar, Network for Studies on Pensions, Aging and Retirement, is een denktank en kennisnetwerk. Netspar is gericht op een goed geïnformeerd pensioendebat.

MEER OVER NETSPAR


Missie en strategie           •           Netwerk           •           Organisatie           •          Podcasts
Board Brief            •            Werkprogramma 2023-2027           •           Onderzoeksagenda

OVER NETSPAR

Onze partners

B20231704_PGIM_Blacklogo2
B20221103_Zwitserlevengrayscale
B20231704_PensioenFederatie_Blacklogo
B20231704_DNB_Blacklogo
B20160708_tilburg university
Bekijk al onze partners